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Poor Credit History

How to avoid getting a poor credit history and what to do if you think you have one.

It is surprisingly easy to develop a poor credit history. Unfortunately, one you have one it becomes harder and harder to resolve the situation. Credit companies queue up to lend you money when you have a good credit rating and often do not need finance but they are less keen if you have a poor credit rating. This often leads people to resolrt to other sorts of borrowing with much higher interest repayments, which makes the loan more expensive and more difficult to pay off, increasing the chance of further problems.

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Why is a credit rating important?

All lenders will have what is known in the business as a lending score card. This is a series of factors which are taken into consideration when offering finance. Each lenders will use a different scorecard and your personal situation will result in different scores for each lender. Also each lender will have a different pass mark. As a general rule the higher the pass mark the cheaper it is to borrow the money.

How do I check out my credit rating?

There are two main credit reference companies in the UK. You are intitled to request that they show you the information they hold on you and correct any information that is not correct. They will make a charge to send you information on your credit file but it will be less than £10.The companies are:

Credit File Advice Centre
PO Box 1140
Tel: 08705 143700orExperian Ltd

Consumer Help Service
PO Box 8000
Tel: 0870 241 6212

Once you have this information you will be able to see if there are any reasons why you have bad credit rating. If you do it is not the end of the world. Following these rules will improve the situation, but bewarned it will not recity the situation overnight.

How do you get a bad credit rating?There are a number of ways of getting a bad credit rating, these include:

  1. Defaulting on a loan - not keeping up repayments or making late payments can result in your credit rating being effected
  2. County Court Judgments (CCJs) - these are given when a person has been taken to court for not repaying a debt. These are recorded and will definitately make it much harder to get finance.
  3. Bankerupt- If you have been declared or have voluntry declared yourself insolvent (bankerupt) it will be almost impossible to borrow money from mainstream lenders.
  4. Your postcode - your postcode will have a lot to do with your ability to get credit. If you live in an area where lost of people have not repaid loans then you too may find it difficult.
  5. Applying for too much credit - If you apply for lots of credit and they conduct credit searches this is recorded and other lenders can see the information. Some lenders will get concerned if you have applied for a lot of credit in a short space of time.
What to do if you have a bad credit history
  1. Make sure you pay bills on time as this will show that you are responsible repayer.
  2. If you are struggling to repay current borrowing then speak to the lenders and work out a plan. Do not commit to repay more than you can afford. Once you have agreed a plan stick to it as they will look very dimly if you continually break your promises.
  3. Avoid companies that offer to fix your credit rating and deal with your creditors. They will charge you a lot of money and nobody can fix a poor credit rating unless a mistake has been made in which case you can do it yourself. Use the Citizens Advice Bureau. The last thing you need to do is end up owing more money.
  4. Cut up your credit cards or anything else that will tempt you into borrowing more than you can afford.

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