What is adverse credit history?

What is adverse credit history?

author: Holly

By Holly


Have you recently checked your credit history and been shocked at what you’ve found? If you’ve struggled with your repayments in the past, it’s highly likely that this has affected your credit history negatively.

Many lenders refer to this as an adverse credit history – this just means someone with bad credit. We’ll take you through what this means for you and how you can improve it.

Why has this happened?

It’s important to understand why you have a poor credit history before you can work on improving it.

One of the most obvious reasons for having adverse credit is making payments late or missing them altogether.

Negative marks like these will leave a footprint on your credit history for six years, and this will be visible to any lender who runs a credit check on you.

Your credit history gives lenders an insight into how well you’ve managed credit repayments in the past. It details all your borrowing activity over the last six years. If they can see that you’ve been unreliable with your repayments, they might see you as a risk and be less willing to lend to you, or offer you credit at a more expensive interest rate.

Alternatively, if your credit history shows that you’re a responsible borrower, who always makes their repayments, a strong and positive credit history can open doors to attractive interest rates and credit deals.

What does it matter? 

When you apply for credit – whether that’s a mortgage, credit card or even a mobile phone contract – your credit history will be checked.

Lenders will use at least one of the three main credit-checking agencies – Experian, Equifax or Callcredit. And although you can sign up to view your reports on these yourself, each of these agencies offer a free credit-checking service – Noddle, ClearScore and CreditMatcher.

It’s important to keep an eye on your credit history. Remember that any errors or outdated information can go against you when you come to apply for credit.

Will it affect me?

As we explained above, an adverse credit history means that lenders might be more likely to turn you down. However, don’t assume this will happen, as it’s not always the case.

You might be accepted to borrow but at a higher interest rate or you could be offered a lower credit limit than you originally asked for. Some lenders specialise in lending to people with adverse credit.

Will applying harm my credit history?

This is where it can become tricky.

Every time you apply for credit, this leaves a visible mark on your credit history – regardless of whether you’ve been accepted or rejected.

If you apply to a number of lenders in a short space of time, this can actually go against you. Some lenders may reject you on the basis that you’ve made lots of applications for credit and could conclude that you’re desperate to borrow.

This is where a soft search comes in handy. A soft credit search lets you check your eligibility for products – like credit cards and loans – without leaving a mark on your credit history that lenders can see.  

Each of the free credit-checking services offer this soft search tool, as well as many lenders and brokers.  

Help – how do I improve my credit history?

Having poor credit doesn’t mean all doors to borrowing will be shut on you. As we’ve said, it just might make things a little more difficult.

The great news is there are ways to get your credit history back into shape. If you can do this, you might want to hold off applying to borrow until you’ve repaired your credit history.

It can be as quick and simple as signing up to the electoral register to closing down old accounts you no longer use.

You can find more tips on improving your credit history here.

Of course, whether you’ll be accepted for credit will ultimately depend on the lender. Each lender’s criteria and application process will differ. However, the one thing you can be sure about is that your credit history will be checked every time you apply for any form of credit.

Disclaimer: All information and links are correct at the time of publishing.

author: Holly

By Holly

What is adverse credit history? What is adverse credit history?