Debt Consolidation is not the Only Alternative!
Credit Refusal - The
Self Employed must tread with Caution
Being self employed has
various advantages, especially in UK, where self employment opportunities are in
abundance. As a self employed there is the desired flexibility option in the
engagement pattern and more than that there is complete liberty to proceed and
achieve what you fancy, however, like all tempting proposals to consider, self
employed too has its strings attached. Among the possible connotations, a
frightening eventuality relates to credit refusal.
Credit refusal is a term which announces the harsh decision of the lender to not
to extend credit to the borrower. Quite justified in few cases, credit refusal
seems highly illogical to a self employed borrower, despite the bright credit
history. If you too happen to be a self employed and have experienced the
vindictive impact of credit refusal, then this article could be of help.
Credit refusal criterion
As a self employed, in an attempt to deal with credit refusal, it is first
imperative to rationally comprehend the credit refusal process. Lenders decide
upon extending credit to self employed or any other credit seeker, by
considering eligibility via two key yardsticks. The first relates to the credit
score, as calculated from the income, expenditure, assets and pending loan
details appended by the loan seeker. In this context, while few lenders have
pre-defined quantitative assessment tools, few others have their own qualitative
fields to calculate the scores of the borrowers.
The next yardstick entails checking out the borrower's credit history from
credit agencies which in turn is based upon bankruptcy details, county courts
judgments if any and other such related factors.
Self employed credit refusal process
As a self employed, you might have positive credit ratings to present, however
it is the score calculation, wherein credit refusal comes into picture. While
considering the quantitative parameters, typically prevalent in UK, lenders
deploy assessment tools, which could formally reject a self employed's
application for loan. Reasons for the stated can be understood by looking at the
income classification pattern. As a self employed, there are welcomed benefits
of being able to present the income in a way, which minimizes tax burden; this
re-arrangement however impacts the credit score during calculation thus leading
to credit refusal.
Also, there have been instances in UK, where lenders undertake a qualitative
assessment and reject self employed because of associated income insecurity
concerns. As futile as the concerns could be, yet self employed are rejected and
thus nominated in the credit refusal category.
An alternate path
Despite the stated, scenario in UK is now changing. In fact there are those
who've realized the earning potential of self employed and have accordingly
introduced special loans for the self employed. These are flexible in nature
with special holiday terms to avoid regular monthly payments, thus perfectly
suiting self employed requirements. Moreover, in these special loans, there is
also abundant scope for self employed with bad credit history thus offering the
must desired respite from the agonizing and humiliating credit refusal process.