It is possible to take a loan with a bad or empty credit history, but you will have to try. What should you do to make the bank believe in your solvency?
Briefly about credit history
Credit history is information about your loans, credits and credit cards. If information about arrears appears there, it will be kept for several years. If the debt is not repaid, the information will stay there forever.
You give the bank access to your credit history when you apply for a loan. For the bank, credit history is important information about the borrower. The first thing that is checked is the credit score, which shows the overall state of the credit history.
Low credit score. How bad is it?
Banks generally believe that those who have defaulted once are likely to default again. This is an increased risk.
If the credit rating is low, the bank will not even look at the questionnaire and study the credit history, and will immediately refuse.
Of course, the reason for lowering the rating is also important. It is not so terrible to allow a delay of 1-2 days accidentally. If you systematically violate the terms of the loan agreement or have outstanding debts, it is bad.
The rating may also be low because you have not yet used credit. This also affects approval, but only if large amounts are requested.
How to increase the chances of applying for a loan with a bad credit history
If you want to get a cash loan with a bad credit history, there will be few offers. Increase your chances of approval with these tips.
Find out the probability of approval before you apply
The main problem is rejections, which further reduce the score. They should be avoided. To apply for a loan without problems with a bad credit history, apply only to the most friendly banks or microfinance organisations. In microfinance organisations it is much easier to get a loan.
Start with small amounts
If you expect to take out a large loan in the future, prepare for it in advance. Take out a loan or credit card for a small amount. Pay the money back on time to prove your reliability to the bank. Then take a slightly bigger loan. Most likely, the first loans will not have a low interest rate, and you will have to overpay. But gradually you will get access to larger and more favourable loans.
Arrange a guarantee
With a bad credit history, it is easier to get a loan with a guarantor whose credit history is credible. The risks for the bank are reduced and the chances of approval are increased.
Pay attention to collateralised and targeted loans
The presence of collateral ( property or a car) is a big plus. The difficulty is that such a loan cannot be issued quickly and online. You need to come to the office and draw up a collateral.
The bank will approve the loan faster if it is sure that the money will be spent on something useful that can bring income. For example, education, buying a flat or a car. Such loans are called purpose loans – the approved amount goes directly from the bank to the seller.
What to do if you have tried everything and the loan is not granted
Ask for help, not a loan
Taking a loan online with a very bad credit history and arrears is almost impossible. If you have applied online before, it is worth trying to resolve the issue personally with a manager. Perhaps the bank has programmes to restore your reputation.
Try loans
You could try loans. They are much more affordable than credits. Some microfinance organisations in the Philippines do not take credit rating into account when approving – the main thing is that there is no debt to this organisation. Note that some of them have promotions that allow you to use the money for 7-14 days without interest.
Restore the score
The right actions will help to improve your credit history. When your score rises, credits will become more affordable. For example, you can take several loans in a row from microfinance organisations and consistently repay them on time. This will improve your credit history.