Though lenders accept applications from bad credit borrowers, you cannot take your credit score lightly. An impaired credit standing can be an obstacle to get a loan at affordable interest rates. If you are planning to take out a new loan, you should fix your credit score. Financial experts suggest that you should get a copy of your credit file to see it does not contain errors that may keep you from getting attractive deals.
Bad credit loans in Ireland can help you tide over during an emergency, but you should try to maintain your score. If it goes below perfect, you will end up paying high interest. It will cause additional strain on your budget, and you may fall into debt.
Bad credit is a term that describes multiple issues related to your financial behaviour that include late payments, loan defaults, maxing out credit cards, identity theft, and disputed errors. This record manifests your poor financial management skills and irresponsible behaviour to financial obligations. It increases the default risk of a lender, and hence they charge high interest rates.
It calls for an intriguing question – how long it takes to fix a bad credit rating. From disputed errors to bankruptcy, everything can stay for months or years on your credit report.
Disputed errors and identity theft
“These errors take 30 days to get off your credit file.”
Not every time a borrower is responsible for errors appeared in their credit files. Sometimes lenders mistakenly send in false information to credit bureaus. It can negatively affect your score. Before you apply for a loan, you should peruse your credit report to make sure that it does not consist of a default that you do not recognise.
Identity theft is also one of the biggest reasons for having a poor credit score. A sudden increased in credit utilisation ratio can severely pull your credit score. You can dispute such errors. Credit reference agencies will investigate, talk to your lenders before making any amendments in data. The agency will take 30 days to remove such errors.
“Hard inquiries remain on a credit report for 24 months. However, they will have an impact on your credit score for the first 12 months only.”
When you apply for a loan, a lender will look over your credit report to figure out your credibility. This move leaves hard footprints on your credit report. Each hard inquiry pulls five points from your score because it suggests that you are short on cash. The fewer the hard inquiries, the better it is.
While a single hard inquiry has a minimal effect on your credit score, multiple inquiries can prevent you from having a loan signed off on. These footprints stay on your report for two years. You cannot have it erased from your file, but it loses the impact over time. There must be a gap between 15 and 45 days within each application to avoid getting multiple hard inquiries.
“Late payments stay on a credit file for seven years. However, the impact will be very high when it is reported for the first time.”
When you fail to pay off the debt on the due date, your lender will not immediately report to credit reference agencies of your default. However, you cannot escape late payment fees and interest penalties. They will give you 30 days to clear all your dues. If you still miss your payment, the lender will inform the bureaus of your irresponsible behaviour.
You cannot have them removed, but the effect decreases as the delinquency ages. It will take at least two years to improve your credit rating provided you do not miss any payment down the road.
CCJ and bankruptcy
“CCJ and bankruptcy stay for six years.”
If you settle your CCJ within 30 days from the date of issuance, it will not show up on your credit file. If you pay your dues after the expiry of given time, it will show up, but your lender will mark it ‘satisfied’. Likewise, even though the bankruptcy is discharged, it will stay for at least six years.
The bottom line
It is paramount to fix your bad credit score. Reduce the number of your loans, pay off your debt on time, avoid maxing out your credit card, and keep your credit utilisation ratio as low as possible.