If you know that your credit history isn’t the best, it can be tricky to know what your options are when it comes to applying for credit in the future. In this guide, we’ll walk you through what you can do to improve your credit rating - and how to go about getting a loan if your credit rating isn’t in the best shape.
A credit score is used by lenders to help them decide how much of a risk lending to you would be. They will use your credit history, the details you’ve provided on the credit application and any past information they have on you (if you’re an existing customer) to help them generate your credit score. This score will vary from lender to lender, but it’s generally thought that people with a higher credit score are seen as being less of a risk.
Be aware that every lender has their own specific criteria with which they measure you against, and so your score with one may differ from the score you’re given by another.
“a bad credit history is not the same as having no credit at all...”
You will be considered as having a bad credit score if you have done anything that does not stick to the terms of your original credit agreement. So, most commonly, this will be making repayments in part, late, or not at all will all show on your credit history as will having defaults, a CCJ (County Court Judgment), IVA (Individual Voluntary Arrangement) or being declared bankrupt.
But keep in mind that a bad credit history is not the same as having no credit at all. If you’ve never borrowed before you may find it hard to secure credit, as your lack of credit history will mean that lenders have no evidence you’ll be a reliable borrower, and may reject you because of this.
There are a few things that you can do to help improve your credit score, with some having more of an impact than others. Perhaps the quickest thing you can do is to make sure that you’re registered on the Electoral Roll, and that your correct address and current surname are updated on your credit report.
This is important as lenders use this information to confirm your identity. You can see your credit history and check this information by logging on to one of the three credit reference agencies: Equifax, Experian or TransUnion.
Want to find out more information on how you can rebuild your credit history? read our handy guide.
Still want to know more? Read part 2 of our guide here.