Poor Credit Rating

Poor Credit Rating? Here’s Why

If you have debt levels that are regarded as high (relative to your income or assets) then your credit rating is likely to be penalised by Credit Reference Agencies. A key indicator will be the amount of debt on your credit card and how often it is paid off. Remember that a credit limit is a limit – it`s the maximum you’re allowed to borrow.

Multiple Applications

Whenever you make an application for credit, your details will be registered with financial organisations that use Credit Reference Agencies that share data in order to make decisions about your credit-worthiness. Making a number of applications, especially if they are unsuccessful, is likely to have a negative effect on your credit score.

Making Payments When They Are Overdue

Failing to make payments on the date they are due is likely to have a negative effect on your credit rating. When you enter a financial contract, you undertake to make payments on a certain date (usually each month) and so, if you do not make the payment on time, this constitutes a break of contract and is likely to mean your credit rating is down-graded.

Failing To Make Repayments

If you miss the payment altogether, this is also regarded as a breach of contract and will lead to your credit score being penalised. The reason for being penalised is that financial organisation will realise that you financial circumstances have changed for the worse. If you find that you are unable to make the payments you agreed to when you took out your financial agreement, you should contact the financial organisation immediately in order to discuss your options.

Writing Off A Debt

In certain circumstances, financial organisations will write off a debt if they decide you are no longer capable of repaying it. This happens rarely and will incur a substantial fall in your credit worthiness. Subsequent applications for credit will be subject to credit ratings checks, and they are unlikely to be successful if potential future lenders see that you have a history that includes an unpaid loan.

Home Repossession

An inability to maintain mortgage repayments on your home is likely to lead to it being repossessed. The consequence of this is that your credit ranking will fall and it will be considerably harder for you to obtain a mortgage or loans in the future. If you find that you are struggling to make your mortgage payments, you should contact your lender immediately in order to discuss the options available to you.

Debt Solutions and Individual Voluntary Arrangements

The refinancing of debt, such as using smaller payments over a longer period of time, may have a negative impact on your credit rating because they demonstrate to financial organisations that you have been unable to maintain the payments you agreed to at the outset. This can apply to Individual Voluntary Arrangements (IVAs), even though you have taken steps to refinance the outstanding debt.

County Court Judgments

A County Court Judgment (CCJ) is made when a lender attempts to recover the money that is lent to an applicant. Details of the CCJ are made available to Credit Reference Agencies who assess the data in order to calculate your credit score. Even though a CCJ agreement may result in the provision of a payment plan, the CCJ will still have a negative impact on your credit rating.