How to Overcome a Bad Credit History

In this article I will reveal some expert tips on how to overcome a bad credit history.

A friend of a client contacted me recently, and when I answered his call he said "I need a second mortgage bad credit loan quick".

Naturally I asked him exactly what he meant. I gathered he was in some sort of financial difficulty, but I needed specifics. Before I tell you what he told me, I want to clarify that I have his permission to provide details here.

He said he thought he was a bad credit risk because he had not borrowed any money before and would have "no credit rating". His circumstances were as follows: 1 He had never applied for a loan before but wanted to apply for a home loan. 2 He had been working in his own business for just under 3 years. 3 He had been trading profitably for most of that time except the first 6 months or so as his business became more established. 4 He had saved about $8000. 5 He was single, but was living with his girlfriend who had a job at the supermarket. She had been there for just over 18 months.

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I told him that, off the top of my head, he should not have any real problems getting a home loan.

As it happened he was successful in getting his loan and moved in to his new home four months after I spoke to him.

At the outset I explained to him that not having applied for a loan before was not a problem. A credit rating is not really a good way to explain whether a lender will consider you a good risk. What a lender looks for is quite varied according to each person's individual circumstances but generally they want to see: a. A good steady employment history. b. A clean credit history, if you have had any loans in the past. In other words, no history of late or slow payments, but certainly will not like any evidence of Court Judgments or Bankruptcy. c. Sufficient income to pay the loan. d. Evidence of savings.

Now, whilst it is not always necessary to satisfy all these criteria, they paint a clear picture for a lender, and if they can tick every one of the above boxes, the applicant will probably qualify for a home loan.

This particular client did not understand the language he was using when he said "second mortgage bad credit loan", as none of those words applied to him.

First, a second mortgage is a term rarely used these days, it is usually called a refinance, but can depend on how the loan is used by the customer. But, you can't have a second mortgage without having a first mortgage!

Secondly, he didn't have a "bad credit" problem at all. Not having a credit history does not really matter except in very rare circumstances. A bad credit history is another thing altogether and I will cover that topic in another article soon, and show you how a person with a bad credit history can still qualify for a home loan.

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