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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:
Equifax
Credit File Advice Centre
PO Box 1140
Bradford
BD1 5US
Tel: 08705 143700orExperian Ltd
Consumer Help Service
PO Box 8000
NOTTINGHAM
NG1 5GX
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:
- Defaulting on a loan - not keeping up repayments
or making late payments can result in your credit
rating being effected
- 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.
- Bankerupt- If you have been declared or have voluntry
declared yourself insolvent (bankerupt) it will be
almost impossible to borrow money from mainstream
lenders.
- 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.
- 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
- Make sure you pay bills on time as this will show
that you are responsible repayer.
- 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.
- 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.
- Cut up your credit cards or anything else that will
tempt you into borrowing more than you can afford.
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