Credit Repair Guide

Credit Repair Overview
It's all too easy for individuals to find themselves in a situation where they have a poor credit rating these days. This could be brought about by any number of reasons. There may have been a large number of credit scores carried out against someone's name which would reduce their credit score. In an uncertain employment market, redundancy or job loss could lead to an individual being unable to maintain the monthly repayments on their mortgage, loans and credit cards, or it could simply be a case of someone over committing themselves and ending up in an unmanageable debt situation. Credit repair is the process by which an individual can improve their credit rating.

What is a bad credit rating?
Bad credit is the situation where an individual has a poor track record of keeping up with repayments on various credit agreements. This can vary in seriousness from having the occasional late payment on a bill, for example, all the way through to having a number of defaults on credit agreements and County Court Judgements, or in extreme circumstances, Individual Voluntary Arrangements with creditors or even bankruptcy. When a company carries out a credit search on an individual, all of the above items will show up on their file and ultimately affect that persons credit score. Each problem area which shows up will reduce the overall score by varying degrees, depending on the nature of the problem. The end result of a credit score will be either, High, Medium, or Low. Brief overviews of such scores are defined below: -

• High Credit Score - A high score is where there are no problems and the individual has a clean financial history.
• Medium Credit Score - A medium score could be where someone has a large number of credit commitments, even if all the payments are up to date, or there is some history of missed payments or slight arrears.
• Low Credit Score - A low credit score would mean that the individual had more serious financial problems, such as defaults or County Court Judgements for example.

How can I check my credit rating?
If you are unsure of your credit rating and wish to find out how you stand, you should contact one of the major credit rating agencies such as Experian or Equifax. A basic report can cost as little as £2. You will need to supply the company with your full name (and any previous names) and address history for the past six years. A full report will show: any credit scores carried out against your name, any finance agreements in your name, such as loans or credit cards, along with a full payment history including arrears and defaults. The report will also show any County Court Judgements against you, which court made the judgement and who brought the claim against you. The report will also state whether you have a high, medium or low credit rating.

How can I repair my credit rating?
There is no quick way to repair an individuals' credit rating as it is based on historical events. It is possible however, to improve ones' score going forward. The first thing to do is to obtain your credit file as described above. This will give you all the information required regarding any arrears, defaults or CCJ's. These must all be cleared in order to improve your rating. This may seem all very well, but if someone is unable to keep up with existing payments, how are they supposed to repay any arrears? The simplest method of repaying debts is with a debt consolidation loan. There are many specialised lenders who are able to offer loans to individuals with a poor credit rating, in order to repay their existing debts, including any arrears and reduce the monthly outgoings to one manageable repayment each month. The interest rate payable on this type of loan is not likely to be particularly cheap as it will reflect the personal circumstances of the individual applicant. In the case of a CCJ, it is important to contact the court in question, once the debt has been repaid, to obtain a certificate of satisfaction, which proves the debt has been paid. Once all the previous debts have been repaid, you should contact the credit rating agency once more and ensure that they update your records accordingly.

As we have mentioned previously, there is no quick fix solution to the problem of poor credit, but by following the steps outlined above and seeking professional advice, it is possible to improve ones' credit rating. Certainly, a new lender will look more favourably on someone with historical financial problems rather than current ones. If a debt consolidation loan is taken out, it is vitally important to maintain the repayments on this loan, or the whole exercise will have been to no advantage and it may not be possible to repeat the process a second time.