Poor credit history

Definition

The term poor credit history means that you have a number of negative items on your credit file that show you have had some problems with your finances over the last four years.

What causes a poor credit history?

There are a number of factors that can leave you with a poor credit history. The biggest are likely to be caused by problems you’ve had with previous finance packages. This can be things like missed payments or defaults – where you were unable to pay off the agreement and the item you financed was repossessed.

If you have declared bankruptcy or had any county court judgements ruled against you, these will also be recorded on your file and affect the score.

Another potential issue is traceability. Credit check agencies want to be able to see your financial history over the previous four years. To do this, they need to be able to easily see where you’ve lived over that period. If you aren’t on the electoral roll, then this is more difficult and will affect your credit score.

If you have moved lots of times in recent years or have changed jobs quite a lot, then this can also affect your credit history negatively.

How does poor credit history affect me?

A poor credit history means your credit rating will be low, either poor or bad. That means you will not be able to have access to all the different finance products available. For example, the personal contract purchase product, one of the most popular products, is only generally available to those with a good or excellent credit rating.

As well as being limited to certain products, you will also be charged higher rates of interest, meaning products will generally be more expensive.

While you may still be able to find a finance provider willing to lend to you, the terms are generally less favourable than if you were to have a good credit history.

What can I do to fix my poor credit history?

The biggest factor in fixing your poor credit history is understanding what on your credit file is negatively affecting your rating. So the best place to start is to use one of the many free credit check agencies  to have a look at your file and see what the issues are.

Some issues like bankruptcies and defaults cannot be quickly repaired, and will take time to disappear off your file. Any defaults, CCJs or outstanding debts either need to be settled or consolidated into some sort of management plan so that you can start paying it off.

You can also take steps to improve your traceability. Register for your local electoral roll and make sure you notify any finance companies you deal with of any changes of address.

You should also examine your credit file carefully to ensure all the details are accurate. You may find that some agreements that you have paid off are listed erroneously as unpaid. Any issues you find, contact the credit check agency and they will be able to help you clean up your file.