A bad credit score can play a large role in securing a loan. If you have a default, judgement or a black mark on your credit file, it will be even harder to secure the home loan of your dreams. But how do you end up with that dreaded default on your credit file?
We explore two key factors that can lead to a bad credit score.
1. Late or missed payments
Most people have a number of active credit facilities such as mortgages, credit cards, power providers and phone accounts. For the most part, we pay these accounts on a regular base, often using a direct debit facility. However, what happens when you are late making a payment or miss a few payments altogether?
Credit provider is obliged to inform you first
In most cases, the credit provider is obliged to inform you of outstanding payments and how to remedy the situation. If the situation is not rectified within 60 days of the last bill then the credit provider does have the power to inform the credit reporting agencies and list a default against you.
Some providers are more vigilant with reporting defaults
Some credit providers such as telecommunication companies can be particularly active in listing negative items on their customers’ credit reports. Once a listing is made it will be recorded for between five to seven years, depending on the type of the listing. This dreaded default can cause you to have a bad credit score.
Bad credit can make finance options more limited
Once you have such a listing on your credit report, your credit score will be adversely affected. This dreaded listing may result in a bad credit score. Having a bad credit score could make it very difficult to secure credit in the future, which will restrict your financial options.
Take control of your financial history
Taking control of your credit score early on will ensure that you are financially capable of finance. There are many strategies to ensure that you keep a good credit score.
Don’t apply for loads of credit cards at the same time
A bad credit score can also be the result of credit enquiries. When applying for a loan, lenders will use the data gathered from your credit history and place it into their credit models. Each lender will have their own credit decision models developed purely for their requirements.
Each credit provider looks at different things on your record
When conducting a personal credit check, loan companies will be looking at your previous credit history (This may include your payment record, number of other credit applications, how often you change address, whether or not you are on the electoral roll). Each creditor will use different credit scoring techniques to ascertain how creditworthy you are.
Enquiries can negatively affect your credit score
Simply by conducting a credit check on you, the loan company has already made an impact on your credit report. When a credit check is carried out, a ‘Footprint’ is left on your credit report. This credit footprint indicates which lender has conducted a search on your credit file and when the search was carried out. These credit footprints are held on your credit file for a period of five years and can negatively impact your credit rating, resulting in a bad credit score.
How Clean Credit Can Help
Clean Credit specialises in credit repair and can help you remove negative credit items such as defaults and judgements from your credit file. Through this service, Clean Credit has helped many people to restore their credit rating, allowing them to secure credit once again.