How Does Recent Credit History Affect Bad Credit Loans

by : Melissa Kellett



Bad Credit History is assumed when you apply for a bad credit loan but that does not mean it is overlooked. Moreover, recent credit history has more implications than past credit history when it comes to Bad Credit Loans approval. Knowing how recent credit history affects bad credit loan's approval will help you successfully apply and obtain a loan.

Traditional Loans require at least a good credit history for approval. This implies a good past credit history and a good present credit history too. Bad Credit loans, on the other side, will overlook your past credit history as long as there are no critical stains like a bankruptcy and will concentrate on recent credit history.

Past Credit History

Your past credit history gives the lender an idea of what credit problems you have had in the past and how often they were repeated. This information is essential to traditional lenders since they want to reduce the risk involved in the financial transaction to a minimum. Thus, recurrent late payments and missed payments will imply a loan decline even if they are part of your past credit history.

Generally speaking, your past credit history will give the lender an idea of your credit and financial behavior in the past so they can predict what to expect from you in the present. You may think that this is unfair and that people can change their behavior, but lenders do not have control over that and base their decisions on statistics that speak against that possibility.

Recent Credit History

When we talk about recent credit history, we are referring to the last 6 months of your credit report. Within this period your credit report shows your payment history and other information that will help lenders to decide whether you have: improved your credit behavior, worsen it or maintained it.

Your credit report contains your payment history, your overall debt stance and many other details about your financial and credit situation. Both your credit report and your credit score include details on your recent and past credit history. The credit score formula does emphasize more your present credit situation when calculating the resulting score.

Proper Credit Behavior

A proper credit behavior includes both disciplines in the dynamic and static aspects of credit. The dynamic aspect includes avoiding late payments, missed payments and too many inquiries on your credit report due to loan requests or credit card applications. Avoiding this will maintain your credit score so any positive modifier will immediately raise it.

The static aspect includes a snapshot of your outstanding debt, your open accounts and lines of credit and your credit card and store cards limits and agreements. Your debt exposure will determine how much more money you can request from lenders. A high debt exposure will limit your ability to get more finance than what you already have. Bad credit loans will be approved or not according to these factors. Chances are that if you have a decent recent credit history, you will be approved and these variables will only determine the loan amount, the interest rate and the loan length.