What to do with a bad credit rating

In this day and age having a poor credit rating is nothing unusual, and with consumer debt levels in the UK reaching sky high levels more and more people have found themselves with damaged credit.

Having a poor credit rating can affect your financial future profoundly, but these days there are more solutions and facilities available for those with poor credit than there were in the past. This means that even if you have poor credit you can find ways to rebuild your credit and improve your financial future.

It can be quite worrying to have damaged credit, and those with a very bad credit rating could find that getting any form of finance is extremely difficult if not impossible.

It is therefore best to try and pull back your credit rating and get back on track as soon as possible if you find that your credit has suffered damage – or better still maintain a good credit rating from the start. Below are some of the frequently asked questions relating to bad credit:

What is my credit file and credit rating?

A credit file is a file that contains a range of financial information in each individual, such as repayment habits, finance applications, financial outgoings, and a range of personal information. These reports are constantly updated each time you make or miss repayments, take out new finance, make new finance applications etc.

The credit score is generated from the information that is on the credit file, and this is used by many lenders to determine whether you are a viable risk for finance. Credit reports are kept and maintained by a number of credit reference agencies.

How can my credit rating get damaged?

There are a number of ways in which your credit rating can take a battering. The most common is if you make regular late repayments on your debts and bills, or if you miss payments altogether.

However, there are other ways in which your credit rating can get damaged, such as if you make a lot of finance applications in a short space of time and receive rejections, if you become the victim of fraudulent activity, or if a mistake is made on your credit report.

How can I ensure that I maintain a good credit rating?

If you want to make sure that you maintain a good credit rating there are a number of steps that you should take. It is important that you maintain timely repayments on debts and bills for at least the minimum amounts required.

You should also make sure that you check your credit report regularly to ensure that there have been no suspicious transactions and no mistakes on your credit file. Finally, you should make sure that you do not make too many finance applications in short space of time if you are turned down.

If I already have poor credit how can I improve my rating?

Improving your credit rating can be a slow and arduous process, but it can be done. Providing you keep up with timely repayments on bills and debts your rating will slowly improve.

You can also get specialist loans and credit cards for those with poor credit, which when used responsibly and repaid on time can also aid your credit repair.

Also, check through your credit report and contact the credit reference agencies about any out of date or inaccurate information that may have contributed to your poor credit score.

Can I get a credit card or loan with poor credit?

This will depend on the extent of damage to your credit. Many credit card companies will not consider those with poor credit, particularly in the current economic climate. However, there are specialist credit card companies that offer low credit credit cards to those with poor credit, although the interest rates are likely to be very high. However, these can help to improve your credit rating if used responsibly.

There are also lenders that will offer loans to those with bad credit, although many of these will be secured lenders that will only consider homeowners because of the high risk involved in lending to those with damaged credit. Interest rates will still be higher that on loans offered to those with decent credit, but again these loans can help to improve credit if repayments are kept up.

What about getting a car loan with bad credit?

Again, this will depend on the level of damage to your credit rating. Those with very bad credit may find it very hard to get finance from a mainstream lender for a car. However, there are specialist companies that offer finance to those with bad credit providing they purchase the car from their showroom. Do bear in mind, however, that the interest rates can be very high.