Are you trying to find short term finance? A good route to take is through a bridging loan. If the loan is paid off within the fixed payment period, then the credit rating score could see an improvement in turn.
That said, defaulting on finances, breaching terms of agreement or failing to follow through with an exit strategy can impact a credit score negatively. On top of that, it can lead to serious implications that can range from county court judgments to property repossession.
Many people that look into bridging loans have a burning question: whether or not taking it on affects a credit score. It’s an understandable concern that we will explore in this blog.
Will a Bridging Loan Impact One’s Credit Score?
The short answer is: yes, a person’s credit score can be affected by a bridging loan. That said, lenders aren’t mainly concerned with credit scores. They are more into credit rating checks being run on their applicants. If you apply for a bridging loan and it’s not successful, that will reflect on your credit file.
You should not disregard the possibility of bridging loan finance, though! Many lenders tend to give an “in principle” agreement for a loan. That will not end up appearing on a credit file.
How Can Bridging Finance Affect Credit Rating?
As the name suggests, bridging loans can offer a lifeline for people that need to “bridge the gap” between payments for debit and credit. These are the kinds of loans used for renovations and full-on house purchases. They go a long way to help facilitate a property purchase completion before another gets sold or restored.
It should be noted that bridging finance is very similar to the other short-term debt forms out there. If you take out a bridging loan and pay it back before the end of the term, your credit rating should not be affected.
Of course, that is also contingent on following the agreement’s terms and conditions. People who start with a bad credit score can likely use a bridging loan to their advantage.
Minimising Credit Risk
A good rule of thumb to minimise risks when it comes to bridging loans is to make sure the lender is reputable. Shopping around at various lenders is ideal, especially because you need to see the differences in conditions, costs, and terms.
It’s important to get an “agreement in principle” where possible before a bridging loan is completed. That way, you have a better idea of the loan size you can take on.
Additionally, you need to ensure that a soft credit check (or a quotation search) is run. This wouldn’t be applicable only when you are sure of the proposal presented to you. Also, it’s vital to read the small print and get due diligence done.
Conclusion
Bridging loans are a great option in terms of short term finance. It can affect a credit score, though it can also benefit people with poor credit. Working with reputable lenders is crucial, as is taking on an agreement in principle.
Need help with bridge lending? Check out A Move Brokers! We’ve got a wide range of mortgage products that are meant to help meet individual client needs. Book a free consultation with us today!
This article is for information only and should not be seen as advice or a recommendation to act. As a mortgage is secured against your home or property, it may be repossessed if you do not keep up the mortgage repayments.