What do I do if I have bad credit history? What constitutes bad credit and what to do about it

Most lenders will refuse to lend you money if your credit score is below a certain level.

This guide will show you what mistakes can be made and how lenders produce a credit score.

The Credit Score

A credit score is a combination of the following elements.

Your credit report, which mentions facts like the time in which you have paid your previous debts and any payment defaults.

Your change of address, changing your address frequently is viewed as instability and will lower your rating. The most common method of determining your address is voter information and if you have not voted it is considered bad by default.

The answers provided in your mortgage application.

All this data is introduced in a automated mathematical algorithm that gives your lender a certain figure.

The Solution

If you have been refused you can ask why. If the reason is the frequent moves and there is a valid reason for it, the issue can probably be resolved provided you make a complaint.

If you have been refused once, do not go to another borrower. Each attempt that fails is recorded in your file and further lowers your credit score.

After having failed once, get a copy of your credit file. Your credit file is basically your credit information and history. It is compiled and centralized mainly by two companies. Your lender will also have the same source as you.

The first company is Experian.

http://www.uk.experian.com/ or 0870 241 6212.

The second company is Equifax.

http://www.equifax.co.uk/

Each of these credit referral companies will give you your credit file and will also advise you on how to improve it.

The fee for the credit report only, for Experian is about £ 2 and for Equifax £ 14 as part of a package.

If errors have been made, errors that you can provide evidence against, these companies will correct them. If you cannot provide evidence they will allow you to attach explanatory notes to your file.

The Options

If all of the above fails and your credit score is low for good reason you can still obtain a mortgage.

In recent years the number of adverse credit cases has risen in the UK, phenomenon that led to the emergence of bad credit mortgages, at first from niche lenders and lately from main stream mortgagers.

If you have bad credit history you will be charged higher interest and may face overwhelming clauses. Most lenders are very harsh when granting bad credit mortgages so, in many cases it is better to use the services of a broker that will have a better relationship with lenders and can point you in the right direction or obtain better deals.