Causes of bad credit
Banks and other financial institutions score each applicant they receive, this helps them to predict how risky
the applicant is, work out how much interest to charge and possibly other measures.
The problem is that many people don't pay much attention to one of the main influencer of the bank's scoring system, credit ratings.
If you find that you've been turned down for a credit card or loan application, it may well be because you have a bad credit rating.
Here are the common causes of failed credit applications.
Not on the Electoral roll
This is a database of registered UK voter, when you fill in an application form, a lender will check the electoral roll
to confirm the details you have provided.
If you're not on the electoral roll some lenders will reject your application on this basis,
those that don't will require you to provide proof of identity.
Luckily this problem is easy to fix; for details see
Electoral commission
Thin or no credit history
If you've ever had a loan, credit card or other types of credit, it is likely that the lender shared data about it with
credit references agencies. This data becomes part of your credit history.
The more you use credit the more credit history you will gain, if you have never had credit of any sort in the UK, you'll have no credit history; for example if you've just turned 18 or just immigrated into the UK.
If you're patient you might be able to build up your credit using a current account with an overdraft facility (ask your bank to be sure).
If you need credit in the short term, you have a better chance with bad credit products;
see credit cards for people with bad credit and
loans for people with bad credit.
Too many missed payments
Missed payments on credit cards, mortgages or other financial commitments can get added to your credit history,
each will have a negative effect on your credit rating, if you have too many, they also increase your risk in the
eyes of a potential new lender.
Missed payments put you at a disadvantage but they will not stop you from getting credit, if there are few,
the lender might be willing to overlook them. If that doesn't work, there are always bad credit products.
Recent CCJ or bankruptcy
Bad debt is even more damaging than missed payments; bad debt is the failure to make payments on what you owe and can
lead to a County Court Judgement (CCJ), Individual Voluntary Arrangement (IVA) or a bankruptcy.
Any of those would give you a bad credit rating and in the case of a bankruptcy, it stays on your record for 6 years.
Here, bad credit lenders are the only realistic option, you can use their services to rebuild your credit rating.
Related:
Payday cash loans
Small cash loans
Prepaid credit cards