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Everything You Need to Know About Bad Credit (And How to Improve Your Score)

Unfortunately, a credit rating can determine many aspects of peoples lives. Everyone has a credit rating, but for those who have poor credit, it can affect many areas. It cannot only prevent a person from securing a mortgage, loan, or credit card, but it can reduce your chances of gaining monthly car insurance or a mobile phone contract.

Yet, there is no reason to despair, as there are things you can do to resolve this problem. You simply need to do a little research to boost your rating. Read on to find out everything you need to know about a bad credit score and how you can improve it.

What is a Bad Credit Score?

You might be surprised to learn that there is no credit score as such, and might be relieved to discover there is no such thing as blacklisting, either. Bad credit is simply determined by each lender you apply to, as they will carry out an individual assessment to identify if they are happy to offer you credit. If you have a blemish-free record, they will be less likely to turn down your application.

Why Do You Have Bad Credit?

Bad credit can occur when a borrower fails to adhere to the original credit agreement terms. For instance, you may have missed or made a late payment on a loan or credit card. Bankruptcy, CCJs, and IVAs can also significantly affect your credit rating, and it can take many years to recover from it. Paying the minimum on a credit card each month could even indicate to a potential lender that you’re having difficulty clearing your debts.

What to Do if You’re Refused Credit

Being turned down for a loan, mortgage, or car finance can be frustrating. If you are refused, you sadly have no legal right to be told why. You might be tempted to apply to another lender, but you should avoid doing so right away, as this could lead to further credit issues. Your next step should be to review your credit score and improve your credit rating.

How to Successfully Improve Your Credit Rating

There are various factors which can affect your credit score, but fortunately, you can resolve the problem. For example, you might need to correct a mistake on your credit report as soon as possible. Simply contact the company that submitted the incorrect information, or get in touch with the credit reference agency to investigate the issue.

You might face difficulty getting credit if you are not registered on the electoral roll, as the lender cannot confirm that you officially live at the stated address. It is possible to improve your credit score by repaying your debts on time, which will prove to prospective lenders that you are a responsible borrower. It might also be beneficial to take out a credit card that allows you to rebuild your credit history. All you must do is pay off the balance in full at the end of the month, so you avoid interest and, in turn, increase your credit rating.

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