Loans Articles

There is a curse………may you live in interesting times! For those individuals involved in the finance industry at the present time, particularly in the loan and mortgage sectors, we are certainly experiencing interesting times. Whether you are a borrower or a lender, the loan and mortgage market is a tough place following the credit crunch and the effect it has had on the economy as a whole.

Banks, building societies and other lenders, who only twelve months ago were happy to grant a loan to almost anyone, are now being particularly selective about who they are prepared to accept as new customers. Even the slightest blemish on a persons credit file can make a difference as to whether or not they are accepted for a loan, mortgage or credit card and also affect the interest rate they are likely to be charged for it. This is why it is vitally important to ensure that you keep your credit record as clean as possible, as it can make a huge difference to your future financial situation.

Those individuals with a clean record will achieve a high credit score and as such are able to enjoy a wide choice of cheap loans, mortgages and credit cards, which offer good terms at competitive rates of interest. However, for those less fortunate individuals who may be currently experiencing financial difficulties, or have done so in the past (even if they are now up to date again), the choice when it comes to bad credit loans is far more restrictive and a lot more expensive than a mainstream lender. The level of a person’s bad credit can have a huge impact on their ability to obtain a loan and whereas in the past a lender may have disregarded a very minor problem with an applicants financial history, nowadays, due to a severe tightening of lending criteria, a lender will take everything into account when approving a potential new customer and someone with a low credit score may be refused a loan altogether.

It is not only an individual’s financial history of things such as county court judgements, arrears and defaults which affects their credit score, but also things such as how they keep up to date with the payments on their regular monthly bills. If someone is a few days late in making their credit card payment on a regular basis, for example, this will have an effect on his or her overall credit score. Likewise someone who has a large number of credit agreements through existing loans and credit cards is likely to have a lower credit rating, even if all the payments are completely up to date, although having some existing form of credit such as a loan or mortgage is usually beneficial to a person’s credit rating, as it shows a track record of regular payments and proves that the individual can manage his or her money in a responsible manner. Also, each time a person has a credit check made on themselves, not necessarily for a loan application, but possibly for other items such as a new mobile phone contract for example, this leaves a “footprint” on that person’s credit file, which can reduce their rating also.

When a credit check is carried out on a person, it is usually through one of the three main credit reference agencies in the UK, which are Experian, Equifax and Call credit. It is possible, for a nominal fee, to obtain a copy of your credit file from each of these companies and their contact details and website addresses are available elsewhere on this web site. It is a good idea to check your credit file on a reasonably regular basis as often one or more of the agencies may hold false or inaccurate information regarding your personal details, which once again can affect your ability to be accepted for a loan or other credit. The company in question can alter any incorrect information, but you need to draw their attention to it. A regular check on your credit file will also show up whether anybody else is fraudulently using your details to obtain credit for him or herself through a cloned credit card perhaps, or even worse, stealing your identity to take out new loans etc. This type of criminal activity is on the increase and keeping an eye on your credit file is good way of monitoring the situation.

For someone who already has a poor credit rating and wants to improve the situation, then the most important thing is to keep on top of the problem. Firstly, the individual in question should obtain a copy of their credit file in order to ascertain the full extent of the damage; many people with bad credit have little or no idea as to what their exact financial situation is, particularly when it comes to things like arrears and county court judgements. All these will be listed on the credit file. The next thing to do is to clear up any arrears on finance agreements as soon as possible and also to repay any outstanding county court judgements.

Once a county court judgement has been cleared, the individual should obtain a certificate of satisfaction from the court responsible for bringing the case against them and a copy of this should be forwarded to each of the credit reference agencies as proof of payment. They will then be able to update their records and remove the offending item from the person’s file. It is then vitally important to maintain the regular payments on all credit arrangements to improve your overall credit rating, one missed payment can put someone right back to square one. At the same time it is important not to apply for any further credit through additional loans or cards, as this will lower the overall credit score.

It is not possible to repair a person’s credit file overnight, it is a long slow process which often requires financial sacrifices in other areas and a great amount of self discipline, but by sticking to this procedure, regular checks on an individual’s credit file will start to show a steady increase in that person’s score and eventually lead to a clean bill of health as far as their finances are concerned.