Adverse credit is a term you might have come across when applying for credit or even looking to rent a property.
Quite simply, it refers to someone with a bad credit history.
If you have previously missed payments - or simply been late making them - there’s a high chance that your credit history will be regarded as adverse by future lenders.
What’s my credit history?
Before we get started on how you can check whether you have adverse credit, it’s important you get to grips with what your credit history is.
When you apply for any type of credit - anything from a loan to a mobile phone contract - your credit history is checked. It is one of the factors that can determine whether your application is accepted or rejected.
And when you sign a credit agreement, the lender will report this to the three credit reference agencies - Experian, Equifax and CallCredit - too. This means your credit history gives lenders an accurate insight into your ability to manage credit.
Each month, lenders will update these agencies on how well you’ve managed your payments. This information will be made visible to both lenders and yourself.
If you always make your repayments on time each month, your credit history will reflect this.
But if you’ve struggled with managing your finances and have missed your repayments, this will also be marked on your credit history. This mark can remain on there for six years or so.
How do I check?
You can head to any or all of the three credit reference agencies to check your credit history.
Alternatively, credit-checking services like CreditMatcher, Noddle and ClearScore are free to access. You can find out more about these services here.
If you have an adverse credit history, the most important thing to do is not panic. There are things you can do to gradually improve your credit history.
But first, it’s important to understand why you have bad credit.
What can I do?
If your credit history has been negatively affected because you’ve been late or missed your payments, make every effort to stick to your agreement and keep on top of your future repayments. This way, lenders can see that they can rely on you to pay back what you owe.
Even if you’ve never taken out credit, this can go against you. This is because lenders want the reassurance that they are lending to a responsible borrower. If you’ve never borrowed, you haven’t built up a credit history for them to look at.
There are lenders who specialise in lending to those with a poor or limited credit history. You can read more about this here.
Another thing that might have a negative impact on your credit history is the number of applications you make and when you make them.
Each time you apply, it will be noted on your credit history. Lots of applications made in a short space of time can make you appear desperate to borrow, which can put lenders off.
If you know you have an adverse credit history, it may be best to hold off applying until it’s improved.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.