What is Bad Credit?

Every time we apply for a credit card, hire purchase or store card, the credit agencies that work on behalf of shops and other organisations will be contacted. The resulting 'footprint' will be added to our personal file. Our mortgage and loan applications will all be noted and stored. Credit agencies do communicate with one another and your file If we have a bad credit history then chances are lenders will think hard about the future risk we may pose. An inevitable consequence of an adverse credit history is that payments for any future loans are going to come with a higher rate of interest. The general is that the poorer your history the more you will have to pay and this will often be between 1 and 3 percentage points more than the typical variable rate.

If your credit history is only slightly bad and the result of bad luck then you will fall into the light adverse category and may find your lender will reccommend a'credit repair' mortgage. Light adverse may mean that you have held various jobs at the same time - moved house repeatedly or minor CCJ's - usually for less then £500 followed by a long spell of 'good behaviour'.

If your debts where for more and your CCJ's are undischarged then you are heading for the medium adverse category, anything worse such as bankruptcy and your risk is higher for the lenders, putting you in the heavy adverse league.

Anyone can become the victim of bad credit and it is not always the fault of the would be borrower. Unpaid catalogue bills or rental arrears resulting in a hearing will all add to any credit history so it is worth checking that the address you are living at is not black listed. You can check your credit through Experian, Equifax od Callcredit by sending them an application with £2 giving details of your last three years' addresses. You will be given the information to help clear your credit history if it is incorrect. If it is a case of having a bad credit history than the only way to repair the damage is to make sure that any commencing loan payments/ agreements are made on time and in full and with out any further actions threatened.

Always tell your lender/mortgage broker the true extent of your financial situation as you may be liable to further action if the application has progressed far enough.