There is no such thing as a ‘credit blacklist’. Instead, each lender you apply to will carry out its own assessment to determine whether to offer you credit. However, having a poor credit history will make it more likely that you will be turned down when you apply to borrow money, credit card, mobile phone contract or a mortgage.
It is never too late to repair your credit score and we are here to help every step of the way.
Credit Score & Report Assessment – Potential Creditor
When you apply for a credit facility, such as a credit card or a loan, the first thing the creditor will do is to check out your credit report. Your credit report holds all of the necessary information about you and your financial history. Your credit report will include your current and previous addresses, what credit accounts you have open and whether you have had any issues with repaying debt in the past.
If you fail to stick to the terms of your original credit agreement, information about this will appear on your credit report. For example, making credit cards or loan repayments late, or missing them altogether, will surely affect your ability to borrow in future. Likewise, being declared bankrupt, entering into an Individual Voluntary Arrangement (IVA) or having a County Court Judgement (CCJ) made against you will badly affect your creditworthiness. Even making just the minimum repayment on your credit card each month can have an adverse effect on your credit report, as it may lead lenders to assume you are struggling to clear your debts.
Lenders always aim to ensure they get back their money, and so to have a good chance of getting credit, your report needs to look good to prove that you can handle your loans and credit products responsibly.
Reasons for Continuous Poor Credit Score & Report
If you make a late payment, miss a payment or pay less than is required by your credit agreement, it all is added to your credit history.
Late repayments will not destroy your credit score, but they are a red flag for creditors and so should be avoided if you want to ensure your credit applications have a better chance of being accepted.
If you have been consistently late on repayments for three to 6 months, your creditor may issue a default notice. This usually involves a formal letter, telling you that you need to repay your debts. The default notice is a legal requirement for the creditor to serve you to terminate your credit agreement and to start the debt recovery action.
Defaults can have a big impact because they are proof of whether or not you can be trusted with credit, and are one of the first things a potential lender will look for. It does not matter if it is your mobile phone bill or mortgage. If you defaulted on a credit account, there will be a mark on your payment history and it will stay on your report for 6 years.
Formal Debt Solutions – Bankruptcy, VA and DRO
If you have any debt solutions listed on your credit report, they show that you have made the effort to sort your debts but also suggest that you can be at risk to lenders. An IVA (Individual Voluntary Arrangement), DRO or bankruptcy listed on your report will bring your credit score down.
IVAs and Bankruptcy will have an effect on your credit score for at least five to 6 years, as they remain listed on your report even when completed. If you have taken on a debt solution such as a DMP (Debt Management Plan) then this will be marked against defaulted accounts. And while it might not directly affect your score, it is there for the lenders to see.
Having No Credit History
Your credit rating will also be affected if you have never taken out a credit card or any kind of loan. In these instances, the credit reference agencies have no information to go on when deciding whether you will pay off any money you borrow in a reliable and timely manner.
If you do not have any credit and your score is low, it is a good idea to take on something like a small credit card and pay this off in full regularly. Many people do this by using their card just to pay for household shopping and then clear the debt at the end of the month to prove they can responsibly manage their money.
Use of Minimum/Maximum Credit Limits on Your Credit Cards or Store Cards
Available credit is the unused amount of borrowed money you have access to. If there is a lot that has been left unused, this might make future lenders nervous because they may think you are planning to make some big purchases in the future.
Therefore, if you have a credit card you do not use, that is up to date in repayments and has a large amount of money available, it may be better for your score to cancel this rather than have it sitting there.
If you have used all your credit limits, it is recommended to clear your debt by paying a lump sum to bring down your debt balance as repayment via minimum payment could take longer to control your finances and you would end up paying a lot of interest and charges as a fee. There is a higher risk of payment default as a large debt amount requires a higher minimum payment to pay on your credit cards.
Electoral Roll and Registration to Vote Update
The electoral roll is used by credit agencies to confirm your permanent and current address, as well as where you have lived and had credit before. So, if you aren’t listed this goes against you and your credit score.
It is easy to register to vote. So if you know you are not on your local electoral roll at your current address then register to get things in order.
It is a legal requirement to register to vote and if you refuse to give details when your local electoral registration office requests them, you may be liable for a fine of up to 1,000. Knowingly adding false information to the electoral register could result in a fine of 5,000 or even prison time.
Too Many Credit Applications
There is no limit to the number of credit applications you can make, but not all of them will be accepted.
The more you apply for credit, the more this pushes your score down. Every credit application leaves a footprint, and later you wonder – what affects my credit rating? It may just be those several credit cards or store cards you have recently applied for.
For other credit products like insurance, soft searches will take place that will not affect your score. Even some mortgage lenders only do soft searches when considering you.
Joint Account Holder’s Finances
If one of you has a poor credit history, it is not normally a good idea to open a joint account. Just living with someone, or being married to them, will not affect your credit rating, but as soon as you open a joint bank account together you will be co-scored.
If one of the account holders takes money out of the joint account, there are not many options for getting it back.
If the account becomes overdrawn, each joint account holder is responsible for the whole of the money owing; so you could become liable for repaying the other person’s debt.
If you have any joint credit with your partner, then their credit report can potentially affect yours. If they apply for credit, your report will also be searched as well, and if they have anything negative in their report, it could start to affect your chances of getting credit.
Types of Credit
When calculating your credit score, credit agencies will prefer to see non-mortgage credit on your report than mortgage products, simply because there is less risk involved. This means non-mortgage credit will improve your score more, over time. Your overdraft is an example of a non-mortgage product you do not use often, but you may have proved you can make repayments when necessary.
Mortgage products when first taken out will severely affect your credit score, but over time and as you make regular repayments it will creep back up. Maintaining a good credit score takes time and patience, as well as careful thinking before making any big financial decisions once you already have credit products in place.
Length of your Credit History
The length of your credit history will affect your score. A long history with a good record of accomplishment of repayment will go massively in your favour. This is because it proves that you can take on credit products and maintain them over time and that you are not a future risk.
What type of credit products are listed on my report?
There is a wide range of things that contribute to and affect your score, including:
- Utility bills – Payments made to your water, gas, and electric providers may be included in your report.
- Mortgages (Personal and BTL) – This is one of the most significant credit products to appear on your report, and lenders will be able to view your payment history.
- Personal loans (Secured and Unsecured) – If you take out a loan, it will appear on your credit report and have an impact on your score.
- Credit cards – Your credit card repayment history will be viewable on your report.
- Hire Purchase Agreements – If you take on a finance deal or a PCP loan with a car manufacturer, this will be listed.
- Mobile phone contracts – Mobile phone contracts are classed as credit deals, and so the repayments you make will be listed.
- Buy now and pay later agreements – Any financial contract you take on will be listed, including repayment schemes.
What should I do if I am refused credit?
If you are refused credit, you do not have a legal right to be explained the ‘Why’. If a rejection is based on information obtained from a credit reference agency, the creditor must simply tell the borrower that this is the case, and provide details of the agency concerned. They are not obliged to offer any further information. If you feel you have been turned down for credit unfairly, you can appeal and supply further information to support your application. Should you still find yourself unable to get the credit you originally applied for, it is important not to apply for another credit card or loan immediately as this could cause further problems. Instead, you should check your credit report and take steps to improve your credit rating before trying to borrow from another lender.
What doesn’t affect your credit score?
There are a number of things that will not affect your credit score, including:
- occupation and employment history
- student loans
- where you live
- marital status
- whether you have children
- informal debt solution agreements between you and your creditors, but a default will.
You should check your credit report and take steps to improve your credit rating before trying to borrow from another lender. Three credit referral agencies (Experian, Equifax and Callcredit) who hold your detailed information on your credit report. You may apply to them to get your credit report and check your report regularly to see any updates.
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