A debt consolidation loan could help you lower your monthly repayments and really take control of your finances. It may be right for you if your debts have become hard to track, and/or are taking up too much of your disposable income (total income minus essential expenditure).

However, at a time like now, debt consolidation loans (and other forms of credit) are sometimes difficult to obtain.

‘Your Credit Record’

‘Your Credit Record’ is a guide published by APACS (the Association for Payment Clearing Services), which shows how the way you handle your finances could influence your chances of being accepted for any form of credit.

Your credit report is ‘an important source of information which lenders use when they consider an application for credit’, as the APACS guide puts it.

‘Typically, between forty and fifty percent of all applications for credit cards are rejected, so it makes good sense to understand what information is used to make lending decisions.’

During a credit crunch, many forms of credit can be particularly difficult to obtain, so it’s more important than ever to keep your credit report ‘healthy’.

Being approved – and being rejected

Many applications for credit are rejected, but you could find out why if you talk to the lender. This can give you a chance to improve your chances of being approved when you apply for credit in the future. So…

1.    Look at your credit report. Credit reference agencies (CRAs) will charge you $12 for a copy of your credit report. Bear in mind that the three main CRAs all record different information, so it might be worth getting in touch with two of them, or even all three.
2.    Study your report. If there’s something on your credit report that you know is wrong, and you can prove it, you should contact the CRA. You have the right to ask them to either rectify the mistake or remove it.
3.    Solve any problems. If you find any genuine problems on your report, it’s worth trying to address them. For instance, could you pay off any outstanding bills? Or catch up on your arrears? If so, then this might improve your credit rating.
4.    Explain the problems. You can add comments to things that are included on your credit report to explain why they are there. To give an example: if you missed a bill payment, why was this? Potential lenders can read these comments before making a decision on your credit application.

Is debt consolidation the only solution to debt?

Debt consolidation is not the only way to address your debts – and it isn’t right for everyone.

A debt consolidation loan won’t be right for you if you cannot afford to repay it – or if you don’t have a fixed income, and therefore can’t be sure you’ll have enough money each month to make the payments.

And even if you can get approved for a debt consolidation loan, an alternative debt solution, such as debt management, or an IVA (Individual Voluntary Arrangement) may be more appropriate.

For more information on debt consolidation loans, and help deciding if this approach might be suitable for you, you should contact a professional debt adviser.

Article Source:http://www.articlesbase.com/personal-finance-articles/debt-consolidation-loans-and-credit-reports-981647.html