Using Loans to Repair your Credit Score

As much as you may not like it, debt is becoming a way of modern life and a way that many individuals are being forced to live. However, once out of debt it can leave us with a huge inability to get decent amounts of credit, which can leave you renting, with an old car or with no luxuries in life. Where many banks are against refinancing of debt, it’s not always difficult to gain finance, on some occasions on an interest-free basis, to supplement your spending.

However it’s important not to despair. Why not use a loan to rebuild your creditworthiness? This can seem like the perfect option at first, however it’s important to remember that using finance to sort finance can be expensive, as it’s going to be very hard to get a fair rate. A loan that, say HSBC could do for 9.9% to someone with a perfect rating will not be the same to someone with a history of bad credit and missed payments, whilst at the same time, it’s important to realise that while an interest rate of 50% might help to improve your score, it certainly won’t do your pocket any good, which could force you back into debt. At the same time, it certainly seems a bit silly to pay £3,000 for the privilege of borrowing £1,500 over two years.

A good consideration to think of if you are tempted to take out a high-interest loan is a specialist credit card from a lender like Vanquis. It allows you a small limit with a high interest rate to start, however it’s not hard in increase your limit and also your rating at the same time, by making sure that you pay in full each month, meaning that you’re not paying a penny for the privilege of having access to extra cash again. There are high-street banks offering similar programmes, so it’s up to you to shop around for the best deal. If you’re still struggling to find a suitable credit card, it may be worth finding a ‘secured’ card, where either cash or personal possessions are held by the company to ensure that you pay in time.

Whatever you do to improve your credit score, it’s important to remember that if you shop around, there are some good deals to be taken advantage of. Just because a loan might be the most convenient option, it may not always be the cheapest and certainly may not be the best option for you.