What you need to know about bad credit

Your credit score and report determine, in the eyes of lenders, the level of risk they are undertaking when approving your application for any type of loan. If you have a poor credit score and report it unlikely that you will be able to borrow, but if they are good you will find borrowing money relatively easy. Here we take a look at bad credit, how you get it and what it means if you have it.

What is bad credit?

There are several reasons why you may be deemed to have bad credit. It may be as simple as you already having a significant amount of debt, have made late payments and therefore taking on more may mean you aren’t in a position to repay.

Other reasons include failure to keep up with repayments on existing credit you have taken out. Or it may be that there is something on your public records, a county court judgement for example, that means you are ineligible for credit.

What it means if you have bad credit

Bad credit can affect more than just your applications for things such as mortgages, credit cards and personal loans. You may also find that you are charged more for insurance cover, you might have to pay an increased security deposit to a landlord when trying to rent a property or when dealing with mobile phone or utility providers.

All of this can make life very difficult as you find you are unable to function effectively in a society that is increasingly dependent on extremely formal and digitised financial transactions. So what can you do in order to reverse the situation and improve you credit score and report?

How to improve your credit score and report

In the first instance you need to find out exactly what the reason for your bad credit is. Obtaining a copy of your credit report is relatively easy and will help you plan your next steps.

Applying for a basic bank account will mean your salary can be deposited into it, plus you can set up direct debits to pay bills and repayments if you have any credit outstanding – this will start to improve you credit score.

If you need a credit card, lenders such as Ocean Finance offer a quick check service which won’t affect your credit rating.

Bad credit can be hard to cope with but taking sensible steps to discover the root of the problem and then a responsible approach to fixing means that little by little you can get yourself back on track.