Adverse credit history: what does it mean exactly?
If you’ve ever checked your credit history or spoken to the likes of a lender, financial advisor or broker, you may have come across the term ‘adverse credit’.
Adverse credit simply refers to someone with a poor credit history. If you’ve struggled to manage your payments in the past, you may find that any future applications for credit you make, whether that’s a loan, credit card or mortgage, may be impacted on.
The thing is, when you have a credit card, loan etc., a record of your repayments shows up on your credit history. Any negative marks, like a missed or late payment, will be visible for six years or so. And this is what could impact on your success when you apply to borrow in the future.
So if you’ve never looked at your credit history, it’s worth doing so. This way you’ll be up-to-date with what lenders can see when they check it. Plus, any errors on your report can be rectified.
Unfortunately, lenders don’t always let you know if you’ve been late or missed a payment. This is why it’s important to check your credit history regularly so you can address any issues like this before you apply to a new lender.
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What about my score?
If you’ve signed up to a credit-checking service, the first thing you’ll probably notice is your credit score. If you’ve struggled with borrowing in the past and your score is low, it’s not the be-all and end-all.
After all, lenders don’t see these scores - they just see how well you’ve managed your borrowing in the past. Lenders will come up with their own scoring system to determine whether or not to accept each application made to them.
When you apply to borrow, your credit history will undoubtedly be a major factor that lenders will consider. But they will take your income, outgoings and how much you’ve asked to borrow into account too.
If you currently have a credit card or loan, make sure you keep on top of your payments. This will show lenders that you’re sticking to the agreement you made and making every effort to pay back what you’ve borrowed. If you have a credit card, you can set up a Direct Debit so that at least your minimum payment is automatically taken out, so you don’t have to worry about missing it.
If you’ve never borrowed before, you can build your credit history over time. If you do decide to take out a credit card to do this, make sure you keep up with your repayments and never miss them. And if possible, it’s a good idea to clear the balance in full every month to avoid paying interest.
By taking these steps, lenders should see that you’re a responsible borrower and your credit history won’t be negatively impacted.
Disclaimer: All information and links are correct at the time of publishing.