Rebuild Credit Ratings for Low Cost Loans: Improve Credit Scores for the Lowest Interest Rate Loans

A low cost loan means that the customer pays less interest over the full borrowing term. In order to get approval for the lowest interest loans, it is necessary to have an excellent credit rating. Each month lenders report to credit reference agencies so failing to make debt repayments punctually will lead to a reduced credit score. Miss payments entirely, default on a loan or declare bankruptcy and a credit score rating will plummet. Fortunately, a report is only a snapshot of that person’s current credit worthiness so it is possible to gradually rebuild credit ratings before applying for a low APR loan.

Rebuild Credit Ratings by Repaying Debt Punctually

Making the repayments for mortgages, loans and charge cards on-time will lead to a better credit score. Rebuilding bad credit won’t happen overnight, but there will be a slight improvement following each timely repayment. Miss a payment and the credit history repair process will need to start again. Should there be no active agreements, it may be possible to get a credit card for poor credit. Although the limit is normally low, making the repayments punctually will lead to a higher credit rating.

Improve Credit Scores by Repairing Credit Report Errors

A surprising number of reports contain data that isn’t accurate. The automated process used by lenders means that they are unable to determine whether it is bad credit or bad data. The onus is firmly on the customer to get hold of a free copy of their report to check for errors before applying for a low interest rate loan. The Fair Credit Reporting Act gives consumers the right to get an erroneous information corrected. The credit history repair process can take several months from start to finish so allow sufficient time before applying for a low APR loan.

Improve Credit Scores by Paying Down Debt

The lowest cost loans will only be granted to applicants with an income-to-debt ratio of under 36%. This is because there is an inextricable link between having too much debt and default. Before applying for a low interest loan, try to pay off debt to increase the likelihood of approval. For example, make sure that cards aren’t maxed out. Perform a balance transfer to spread debt across several cards if no savings are available to reduce the overall amount of money that is owed.

Too Many Applications for the Lowest Interest Loans

Each search will show on a report for a period of 12 months. Whilst searches are perfectly normal, lenders may interpret too many searches as a sign of money problems and likely default. Applying for multiple low APR loans at the same time will normally lead to rejection. It is important to be selective and only apply for low cost loans after making sure that the eligibility criteria have been met. Lenders provide plenty of material to help customers decide whether this is the case.

Secured vs Unsecured Low Cost Loans

A secured low APR loan for homeowners is best suited for people who have ample home equity, don’t plan to move house, need to consolidate debt and/or wish to spread the cost of repayment. Customers who have a history of bad credit may find that providing collateral is the only sure-fire way to get the lowest interest rate loans. This is because the provision of security underwrites the risk of default. Unlike an unsecured personal loans, failure to maintain the repayment schedule will lead to the repossession and sale of the property to recover the lender’s money. This is a very important consideration, especially if consolidating unsecured debt.