Having bad credit is a reality for a lot of the UK population. In the past you could still borrow even with poor credit, however mortgage providers, loan providers, credit card companies and banks wised up after it added strain to the economy and helped towards a market crash around in late 2007. This means the majority of finance providers are no longer able to help people with even slight marks on their credit history.
If no one with bad credit is being offered reasonable finance options you might wonder how on earth you can recover from a poor credit score and being declined for finance. After all having no credit at all can be as bad as having adverse credit in some circumstances.
Do You Have Bad Credit or No Credit?
The first step to recovering your credit score is to find out what, if anything, is causing a problem. It could be anything from missing a credit card payment, defaulting on car finance or getting a CCJ on a utility bill. You may also have no credit history, so without any previous commitments assess most providers are not willing to take the risk.
You can look at your credit record through a couple of different agencies. Experian or Equifax are often used by the providers themselves when running credit checks on prospective customers, so going to them yourself to get an accurate assessment is usually the most effective course of action.
At the time of writing both the above mentioned companies offer a 30 day free trial of their services.
Check Your Credit History
Once you have access to a credit report it is time to identify what is holding your score back. Here are some things to look out for:
• Have you missed any payments?
• Is there any old debt you have forgotten about?
• Are you on the electoral register?
• Are there any inaccuracies on the file?
• Can you see any fraudulent activity taking place?
Prioritise Your Debt
Now you are on the electoral register, any fraudulent activity has been reported and inaccuracies have been corrected it is time to tackle the biggest hurdle, outstanding debt. Let’s look at an example of some problems you may find on your credit history and tackle them one at a time.
• Credit Card 2 Months Down
In this situation you want to avoid defaulting at all costs. Call your credit card company and explain your situation. Work out a repayment plan to keep your debt from defaulting while making strides to pay it off as soon as possible.
• County Court Judgement with a Loan Provider
County Court Judgements should be paid off as soon as possible, this is very important. If you have a County Court Judgement against you your debt has been to court and a Judge has ruled you must pay the amount in full. You will be sent a form asking how you are going to repay, and if you can’t do it in one lump sum it will ask you for a monthly repayment offer, along with income and expenditure to make sure it is affordable. The loan provider will then either accept or reject your monthly payment offer. Make sure make a reasonable offer as it is in your best interest that they accept.
• British Gas Outstanding Bill
Ring up British Gas and ask if you can pay off your bill in instalments. If you do not in extreme circumstances they will take you to court and you will have a County Court Judgement against you.
• Council Tax Bill with Debt Collection
Council tax is a priority bill because not paying it can land you in jail or with some ruthless bailiff agencies knocking on your door. If you are only slightly behind call up the council right away and set up a payment plan.
Those are just a couple of scenarios you may find yourself in. As you can tell the most important aspect is contacting and making arrangements with the companies you owe money to, if you don’t do this everything will escalate and you will find yourself in a worse position in 6 months’ time.
Improving or Creating Your Credit History
In order to rebuild your credit history you will need some form of credit. If you need a lump sum of money you can look at a guarantor loan or if you want a more flexible solution you can get a high APR credit card. Capital One, Vanquis and Luma are all companies that can offer you credit card products designed to help restore your financial status.
While it may seem strange that you need to take out credit in order to have more credit available to you, remember companies need to see proof of you borrowing and repaying monthly. If you can prove you are financially reliable then you are well on your way to repairing your credit history and having access to a wide range of finance products from banks, mortgage companies and low APR credit card providers in the future.