Avoiding Bad Credit

What is Bad Credit?

The majority of people in the UK today have some form of credit agreement, whether it be a mortgage, a loan, or a credit card. All these financial commitments can actually be beneficial to an individual's credit rating, provided that there is not too much credit outstanding and all the payments are up to date. If a financial institution carries out a credit search on a person, details of their existing finances will be shown on the report, including a history of payments made, which is able to demonstrate to the company that the individual has a good track record of maintaining payments. Bad credit occurs when payments on outstanding commitments have been missed and arrears have built up on the account. The level of bad credit can vary dramatically from the occasional missed payment which has since been caught up with, all the way through to County Court Judgements for bad debt, or even bankruptcy.

How do I find out about my credit rating?

If you are unsure of your credit rating, or have been declined for some type of finance and don't know why, then it is possible to obtain a detailed report from a credit reference agency which will show your entire credit history over the past six years and will include: details of any finance agreement, a record of payment history, any arrears, any county court judgements (including the name of the court) and bankruptcies. To obtain a report, the agency will charge a fee and require your personal details such as full name and date of birth, any previous names and address history over the past six years.

The main credit reference agencies are:

Callcredit Plc
Consumer Services Team
Callcredit PLC
PO Box 491
Leeds
LS3 1WZ
Tel: 0870 060 1414
www.callcredit.plc.uk

Equifax Plc
Credit File Centre
PO Box 1140
Bradford
W Yorkshire
BD1 5US
www.myequifax.co.uk

Experian Ltd
Consumer Help Services
Experian
PO Box 8000
Nottingham
NG80 7WF
Tel: 0870 241 6212
www.experian.co.uk

How do I avoid Bad Credit?

The easy answer to this question is predictably simple, make sure that all payments on any outstanding finance agreements and other commitments are paid in full and on time every month. Another important factor in maintaining a clean record is to not over commit yourself to monthly repayments. Do not take out loan agreements on items unless you absolutely need them and avoid making purchases on credit cards wherever possible, unless you intend to pay off the bill in full each month. If you should find yourself in financial difficulty and struggling to keep up with your repayments, you should contact the finance company who arranged the credit immediately. They will be able to offer help and advice on your situation and may be able to assist in restructuring your arrangements to reduce monthly payments.

Is it possible to repair my credit rating?

It is possible to improve your credit rating, although this may take some time, depending on the level and magnitude of the problem. Firstly you should obtain a credit report from one of the credit reference agencies listed above. This will highlight the extent of the problem and possibly even show up things which you didn't know about. You should then endeavour to bring any accounts in arrears, or default, up to date as soon as possible, or obtain an agreement from the finance company to restructure, or possibly even write off part or all of the arrears. Once an account has been brought up to date, or an agreement has been reached, it is important to notify the credit reference agency in question so that they may update their records accordingly. You should also include written confirmation from the finance company concerned. In the case of a county court judgement, once the debt has been cleared it is important to notify the court which brought the judgement, once again with written confirmation confirming that the debt is cleared, the court will then issue a certificate of satisfaction, a copy of which should be sent to the credit reference agency.