Understanding your Credit History
Sometimes we all find ourselves in a position where we need to spend more cash than we actually have. Regardless of how cautious you are with your finances, there’s always the chance that a disaster could suddenly happen which forces you to consider other lines of credit that might be available to you to pay for unexpected costs.
Unfortunately, for people who have had a difficult past, it’s not always easy to get your hands on the credit that you need. Building societies and banks are becoming more choosy about who they want to lend to, because they want to make sure that bad debts don’t have a negative impact on their bottom line. But what does having a poor credit history actually mean, and what information can banks and building societies get by looking at your credit file?
The Information on your Credit File
Lenders, no matter where you choose to go for your loan, will take a number of crucial factors into account when they are considering whether to give you the money you need or not. Although there are many different things that can impact your chances of getting finance, your credit file is by far one of the most important. There are three credit reference agencies that are currently used in the UK, including Experian, Equifax, and CallCredit, and each of these will carry their own version of your file. The report on your file will contain information about your financial history, including data on your loans, credit cards, and mortgage.
Whenever you apply for finance or a loan, the building society or bank that you want to work with will look at your credit report, and use the information they find alongside other current information (for instance, where you work), to give you a credit score. Contrastingly to what most people assume, you don’t have a single credit score, and each lender has a different way of calculating your overall score for any given time. This is why it is possible for some people to be successful in applying for a loan with one bank, but unsuccessful with another.
How you Can Harm your Credit Score
Unfortunately for people who struggle to manage their money carefully, it’s all too easy to do damage to your credit score. If you always manage your debts well, then you shouldn’t have any problems when it comes to obtaining credit. However, if you have ever made a payment late on a loan, or missed a payment completely, this will show up on your credit report and may make it more difficult to access financial help. Basically, a credit score is an evaluation of how much of a risk you are to credit companies and banks. It determines whether or not you’re likely to make payments on time.
You could end up with a bad credit score if you ever encounter serious financial problems too. For instance, your credit score is affected by things like county court judgements and bankruptcy.
How to Improve your Credit Score
Although it’s very easy to damage your credit score, it’s not necessarily as easy to repair it. However, there are a number of ways that you can improve your credit score. For instance, you should make sure that you are registered in the electoral roll, and do your best to avoid making too many applications for credit as lenders often avoid borrowers that have been turned away by other companies. You should also make sure that your credit file is updated and accurate.
Often, it’s a good idea to show that you know how to carefully control your finances by managing your debts with caution., A personal loan for someone with bad credit can sometimes help in this case so long as payments are made according to the schedule that has been laid out for you by the company that is giving you the money. As long as any loans that you take out are treat with care, and you ensure that you give monthly amounts on time, you should find that lenders begin to believe that you have learned from your past mistakes and therefore can be trusted with additionally credit again.