Lending Products and Credit Repair


As the economy contracted in recent months, many individuals who formerly enjoyed excellent credit scores found themselves faced with the prospect of having their rating drop through no fault of their own. Credit repair services and devices are more popular than ever, because of this. While the credit scoring system has been criticized as being arbitrary and unfair, consumers generally need at least a passable credit score to avail themselves of any large-scale type of lending. There are types of lending available, however, that do not depend upon the measure of credit rating agencies to determine a borrower's viability.

While credit repair is being undertaken, which generally means catching up on past due bills, closing revolving accounts and other measures, it doesn't mean that the individual has suddenly lost their need to have a line of credit available. Most of the credit available to such individuals will be along the lines of cash advance, payday loan and auto title lending. These are short-term lending devices with definite ceilings on the amount they can give but provide a handy way to make certain that bills are paid when needed and that any new lending is taken out in the most controllable fashion possible.

Where credit repair is concerned, it's a general rule that the less revolving accounts one has on their report the better. For a lender, a $5,000 credit limit on a credit card that's presently at a zero balance does not indicate a very responsible consumer: It indicates a consumer who has access to $5,000 of debt and who has no barrier preventing them from simply taking on the debt and getting themselves into a hole. Revolving accounts such as credit card and store accounts generally have to go when one wants to see an improvement on their credit score.

Unfortunately, even though it may be good for credit repair, many individuals rely on these revolving accounts to pay for necessary items, even groceries and gas, between paydays. Even more unfortunately, these individuals seldom actually pay their entire credit card balance at the end of the month and, therefore, have a constantly-increasing amount of debt on that account. Payday loans and auto title loans present a good way of making this a self-limiting affair. Unlike a credit card, they don?t encourage one to simply work their way into a large debt by small degrees.

Where credit repair is concerned, the more debts paid off in full the better and, certainly, the less new, long-term debt taken out the better. A payday loan is an inherently short-term product. The idea is that the amount available to the consumer is directly figured against their income and is designed to allow them the capability to pay back the debt, in full, at the end of the financing term. It's essentially the opposite model used by credit card companies whose model is to trap the consumer into paying several times over for the small amount of principal lent to them.

When one is motivated to undertake credit repair, it's likely that their credit is, frankly, abysmal. Many consolidation programs and other repair devices will require that the borrower has a decent credit history which, more and more, is being revealed to be something only those who don?t need to borrow money can realistically maintain. Payday loans and auto title loans, in the vast majority of cases, do not require a credit check. The lenders aren?t interested in one's past, only that they have a verifiable means of repaying their debt in the future. This means these lending devices are available to, essentially, anyone.

Compared to the other loans one may consider for credit repair purposes, payday, cash advance and auto title lending products are very easy to get. One simply need present proof of employment, a bank account and verification of their identity to get the loan. The loan amount will be determined by the verifiable income of the borrower which means that it's difficult to get in over one's head. If the loan cannot be paid off as planned, most lenders allow the individual to roll the balance over into another term by simply paying the finance charge.

Credit repair is likely to become more and more at the forefront of the public consciousness in the coming year, as the economy recovers and people start looking for ways to finance large purchases again. The way in which credit is calculated may be unfair and of dubious accuracy but it is a fact of financial life today. There is generally a lack of access to financial products until an individual enjoys a good credit score but there are a whole family of lending products available to anyone regardless of how their luck may have turned out in the past.