Bad credit doesn't mean no more credit

We all had our share of disappointments when we're denied of something we need or desire. We are usually denied because of our current circumstances. We are denied a great holiday because it costs too much, we are denied having a new car because they're expensive or we are unable to do much needed home repairs as we don't have the budget for it. This is the kind of situation people face most of the time when they have bad credit. Being declined for a new loan all the time due to their past can be very frustrating and down right discouraging. More often, it is actually unfair. You are basically denied of the needs and desires that a lot of people have access to, only because the bank or finance company you applied with didn't bother to get to know you better.

Fortunately here in New Zealand, all is not lost. Although most banks and other financial institutions are not inclined to do business with those with bad credit, there are still well established finance companies that are more than willing to accommodate such clients. These finance companies are not necessarily heavy risk takers, but they have a more liberal approach at looking at an applicant's current and past situation. While banks and more conservative finance companies use a score card system to determine an applicant's profile, these less rigid lenders dig deeper into the matter. They assume that the difficulties of the past has stayed in the past, and the borrower is now in a better position to service a new loan. Although these lenders' assessment may be more subjective than the banks, they do consider certain situations in regards to the borrowers' bad credits or loan defaults, some of which are:

  • The type of bad credits you have.

  • The number and outstanding amount still in default.

  • Any ongoing payments arrangements.

  • How recent these defaults are.

  • The reasons behind these bad credits.

  • Any insolvencies or judgments.

Different lenders put different weight on the applicant's past defaults, and some discount them all together. A client's credit file is just a part of a lender's overall lending criteria. If the client has convincingly shown stability in regards to their income, employment, residency, financial management, the conduct of their bank accounts and other factors indicating trustworthiness, then pasts defaults may not hold back a favourable decision. Determining the level of a borrower's stability is very subjective and would depend on the flexibility for the lender's credit policies and the assessor's frame of mind at that time.

So, do you shop around for an open minded finance company that will overlook your checkered past? My answer is a big NO. Although there are a lot of "bad credit" lenders you can find in the internet, it will still be a hit and miss thing. There is no guarantee that your application will be approved by the first or second lender you approach. You might find yourself shopping around, while your credit file score deteriorates with every credit checks done on your name. It is advisable to first approach a finance broker who will make an initial assessment of your application, and refer it to the best lender that would most likely approve you. In some cases it may be necessary to farm out your application to more than one provider, the broker will do the credit check on you so the that lenders doesn't have to do their own. The chances of being approved may also be a bit higher due to the broker's relationship with the lender.

All is not lost if you have bad credit. Luckily the New Zealand finance industry is very competitive that there are companies out there willing to be more responsive to this segment of the borrowing public.

If you have bad credit and in need of a loan, see what CAR AND PERSONAL LOANS NZ can do for you.

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