Monday Myth-Buster: Is there an escape from bad credit?


Monday Myth-Buster: Is there an escape from bad credit?

Ignore any of the horror stories you might have heard. Yes, there is an escape from bad credit – there always is.

No matter how tough your situation seems now, it won’t last forever.

There are a handful of steps you can take to start repairing the damage, but the first thing to do is identify where you’ve gone wrong and work on a plan of action as to how you can rectify it.

Taking the first steps

The first thing you must do is check your credit history.

You can do this for free by using services ClearScore or Noddle. It’s good to get into a habit of checking your credit history at least once a month.

By checking your credit history, you can identify the areas where you’ve gone wrong if you’re unsure – whether this is missed payments, defaults or CCJs. As well as this, it allows you to keep track of how you’re doing month by month, and alerts you to any mistakes that might crop up. If they do, get in touch with the credit reference agencies to have them changed.

If you’re not already, make sure to sign up to the electoral roll. Doing this means you’re signed up to vote, and lenders use this as a means of verifying your address. You can sign up here.

It’s wise at this point to cancel any credit or store cards you have that you don’t use anymore. Having too many lines of credit open to you can affect your chances of getting credit in the future.

Group together all of your agreements

To make sure the same mistakes don’t happen again, it’s a good idea to write a list of all your monthly credit agreements. They’re often listed on your credit history if you can’t remember them all off the top of your head.

Anything you pay monthly – whether it’s a mobile phone contract, credit card, loan, mortgage or utility bill – should go on this list.

Then, set up a Direct Debit or standing order with your bank to make the payment on a set date every month. This means the money comes out of your account automatically every month, so you don’t have to worry about making the payment on time.

It’s important that you have enough cash in your bank account to make the payment, though. If you don’t, the payment won’t go through and your credit history may be damaged if you don’t realise. 

Consider borrowing again when you’re ready

Remember, no matter the mark on your credit history, it will only stay there for a maximum of six years. The only exception here is if you’ve been made bankrupt but you haven’t kept to the terms, as this can mean it lasts longer than six years on your credit history.

Once you feel ready, and you can afford to do so, slowly starting to borrow again is the best way to rebuild your credit history. Just be aware that if there are marks on your credit history, you may not be accepted for the best available interest rates.

As long as you make at least the minimum repayment, stay within your credit limit and keep to the terms, a credit card could help you to start patching up the damage. Falling behind or missing payments could result in further damage to your credit history.

Borrowing may seem like the last thing you’d think to do if you’ve struggled with credit in the past, but future lenders want to see that you can be trusted to do so responsibly. Once you’ve proven yourself a responsible borrower, more avenues to credit will open to you in the future.

Of course, it’s understandable if you’re cautious about applying for a credit card when you don’t know whether you’ll be accepted or not. With our QuickCheck tool, you could find out whether you’re eligible for the Ocean Credit Card* before you apply.

*Intelligent Lending Ltd (credit broker). Capital One is the exclusive lender.