Some people apply for bank accounts and end up getting turned down because something in their financial history has had an effect on their credit rating.

• In some cases, people have a poor credit rating because they simply failed to keep up with payments to one of their financial commitments, whether it was loan, a mortgage, a credit card debt or a utility bill.

• Other people may have a poor credit rating by no fault of their own – for example, they may have suffered a drop in their income, or their essential expenditure may have increased, which meant they couldn’t afford repayments.

Some bad credit bank accounts don’t require a check on people’s credit ratings, which means that anyone can get an account as long as they can prove their identity. This can be particularly useful for people who have been turned down elsewhere.

*Budgeting – protecting your credit rating*

If you are concerned about your credit rating, you could take steps now to make sure you avoid damaging it in the future. For example, you could improve your budgeting skills.

A budget is a detailed plan that shows how much money you earn/receive, and where your money goes, on a monthly basis.

In order to create a budget, you have to work out your total income (everything you receive/earn) and take away your total expenditure (the money you spend on essentials, such as food, utilities and mortgage/rent repayments) so you can calculate your disposable income.

Your disposable income is what you can use for payments towards your non-priority debts (unsecured loans, credit cards, store cards, etc.) and, if there is anything left, savings and non-essential expenditure.

By budgeting, you can ensure you have enough money set aside each month to make payments to all your financial commitments – thereby avoiding the risk of missing a payment and damaging your credit rating.

Adapted from Think Banking’s Bad Credit Bank Account section.

Debt Relief Programs

If your debt has become unmanageable then you have most likely opted for debt relief programmes in the form of an IVA or Administrative Order. These programmes are legally binding agreements that help prevent collectors or creditors from hounding you.
If you have entered into an IVA or individual voluntary agreement, your creditors cannot file suit against you or even get in touch with you during the course of the agreement. Under an Administrative Order, your debts are consolidated into a single payment which you will issue to the court. The court will appoint a staff member – likely a bailiff — to collect payments then issue these payouts to your lenders.
As a rule, bailiffs are obligated to transact with debtors in a respectful manner. As a matter of fact, they are required to advise you of their visits beforehand. They may not force themselves inside your home and they may not get in touch with you at your work place.

Credit Card Debts

This year, a rule has been established by the government regarding credit card debt collection. To be specific, the rule stipulates that debtors must be given a period of 30 days before creditors can start collecting the money that these borrowers owe. This rule was put in place in hopes that this will give borrowers sufficient time to devise a repayment plan as well as encourage them to seek professional financial advice.

Other Measures

If you are continually hounded by abusive debt collectors or are often dealt with in an unprofessional manner, you can make a complaint through the Office of Fair Trading (OFT). If the collection agency broke any rules, the OFT can intervene and investigate the practices of such individuals. Should they be found in clear violation of any laws, the OFT is authorised to prevent them from operating their business.

Why Should You Go For Bill Consolidation?

1) High interest rates: If you have various types of debt like credit card debts and outstanding consumer loans, then most probably they all carry different interest rates. Departmental store credit cards have particularly high interest rates. If you opt for consolidating your bills, then you have the option of merging both low and high interest rates from your every debt into a single payment. This would normally lead to a reduced interest rate that can assist you to become debt free sooner.

2) Getting your finances back on track: Bill consolidation can offer a way out for a number of problems that you have been facing when your finances have gone beyond control. Frequently, bill consolidation can reduce your debt to the extent of 40%-60% by getting rid of additional interest and charges. It can also prevent embarrassing calls from debt collection agencies and help you reinstate your credit score.

3) If you are thinking about bankruptcy: A large number of people don’t understand that bill consolidation is an effective substitute for bankruptcy. Bankruptcy is an extensive and expensive procedure that would lead to damaged credit for a long period of 10 years.

Can You Consolidate Your Bills If You Have Poor Credit?

At present, if you have a bad credit score, you must be wondering whether you would qualify for a bill consolidation loan for the purpose of consolidating your bills. Yes, you can qualify. There are numerous bill consolidation companies that are ready to function with you. You might not obtain the cheapest rate, but you can find a comparatively cheap rate than your existing rate. You should make timely payments in order to restore your credit score.

The fatal turn

However, not everything had been rosy for Ms. Scarborough. She began to have a taste for the “finer” things in life, including expensive shopping sprees and expensive luxury cars. At the end of the spending tunnel, she suddenly found herself $32,000 in debt. She recalls sadly:

“I had the mind-set that I didn’t have to wait for what I wanted. I could have it now. By 1997, I was $32,000 in debt, including the $10,000 balance on my GEO Prism. I was making all of this money, but it was going to all of these banks.”

Scarborough had suffered a turn for the worse- because her expenditures increased far more than her monetary production. A simple way to reverse this is to simply let go of the consumerist impulse.

Debt traps

According to Mary Hunt, author of Debt-Proof Living: The Complete Guide to Living Financially Free:

“People often find themselves getting into secured debt, such as mortgage and car loans, which they can sell to get out of debt. But the dangerous types are unsecured debts such as credit cards and signature loans.”

These debt traps are often the most unstable and have the highest propensity for interest rate increases. Credit cards especially, have a nasty habit of suddenly hiking its interest rates depending on market conditions. Instead of just paying for a particular projected amount, the interest rate of your credit card debts will actually increase.

Eliminating debt

According to Kidwell and Steve Rhode, who co-founded Myvesta.org:

“Going into debt rarely happens overnight. It usually creeps up over a period of time. It starts out innocently with one credit card. Then a large home mortgage, vacations, and student loans. Before we know it, we are living from month-to-month and paycheck-to-paycheck.”

The elimination of debt would begin from the elimination of the spendthrift habit. It might be a difficult transition, but you will reap many rewards in the end. Early retirement just might be one of them.

According to Hunt, planning for the future is also affected by debt:

“Being in debt prevents a [financially secure] future. You are transferring your wealth to the creditor.”