Borrowing to help rebuild your credit rating
Unfortunately, if you’ve found it a struggle to keep up with credit card repayments or have got behind with a monthly bill payment, it’s not just your relationship with creditors which can become strained – defaults are registered on your credit record. This often results in a low credit score, which means it becomes less likely you will be accepted for further borrowing. If you can manage to borrow further, interest rates may be higher as you are, in financial terms, perceived as high risk! Rebuilding your credit record takes time, but it can be done. A counter-intuitive measure that may make a difference is to take out a further loan.
Why can a debt consolidation loan help my credit rating?
There are several reasons why a further loan could make a positive difference to your credit score. These include:
– By clearing your debts using a consolidation loan, you’re in no danger of further defaults. Your credit record will also show that your debts have been paid in full. Both these factors can help to positively influence your credit rating.
– If you’re meeting your monthly repayment instalments for your consolidation loan, it shows creditors that you are capable of sticking to a credit agreement. Over time, this also has a positive impact on your creditworthiness.
– In the medium term, improving your credit rating will enable you to access lower-cost borrowing, should you need it. This, obviously, is more affordable to pay back, reducing the chances that you will fall into arrears.
A consolidation loan also makes the process of keeping up with your debt repayments much simpler. A large number of people fall into arrears (and therefore end up with a poor credit score), simply because they forget that a payment is due, so haven’t put money aside! With just a single payment each month, it’s much easier to keep track of how much you owe and when your payment is due to be taken from your bank account.
Get in touch now to find out more about a debt consolidation loan and whether it’s right for your individual financial circumstances.