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What are the causes of bad credit

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What are the causes of bad credit

Having a bad credit rating could be caused by a lot of things.  One of the most common causes of bad credit include paying bare minimum required for your credit card every month, not sticking to your credit agreement, paying the bare  minimum required for your credit card each month, and being guilty to identity theft. Avoiding these things can keep your credit rating high.

Been turned down for a loan, credit card or mortgages due to bad credit can be an ugly experience and there are steps you can take to avoid such and ensure you maintain a good credit rating for a long time.

Identity theft

Your credit card might get stolen and compromised. The thief might use it to run up huge bills that can damage your rating. So to protect your card, ensure you get up mobile and email notifications that set off each time a transaction is carried out on your account so you can be alerted early enough to take necessary steps to prevent further damages.  Identify theft even occurs with online banking that are secured but the best way to handle this is to closely monitor your account so you can immediately cancel your credit card if you notice any suspicious activity.

Not sticking  to the credit agreement

Making a late payment, missing a payment or paying less than is required by your credit agreement can get dded to your credit history and over time, they could result to your credit score being very poor as classified by the credit reference agencies that determine your eligibility to borrow.

Declaring bankruptcy

Most people are aware that declaring bankruptcy  can affect your credit rating. Also, when you use the IVA (Individual  Voluntary Arrangement) which refers to a repayment agreement, made between a lender and borrower  when the borrower isnot able to pay his debts.

Having no credit history

If you have never taken a loan or credit card, it will be difficult for credit reference agencies to rate you or get information about your credit history when you eventually go for a loan. They cannot decide whether you can pay off debt in a timely and reliable way.

One very effective way to repair your credit rating over time is to get a credit card and ensure you make timely repayments as it will build up your credit score. Also,  making timely rental payments through the Rental Exchange scheme, and paying your utility bills on time such as household and mobile phone bills.

Making a choice of the wrong credit card

It’s very essential that you choose a credit card that has interest rates, credit limit, and fees that will help you in ensuring that you stay on top of your repayments and well within your balance limit. Creditreference agencies use these to decide on your rating .

County Court Judgement (CCJ)

If you continue to repay your loan on time, there won’t be reasons for you to be the subject in a County Court Judgements and even If you are issued one, try to pay the full amount in less  than a month and get a certificate from the court that says you hsve paid off the debt, otherwise it can affect your credit rating for a period of sic years. Sometimes errors can occur and a County Court judgement will be added to your credit history, you can rectify this by requesting to see a copy of your statutory credit report. You can do this free of charge by visitingsome websites.

Only paying the minimum each month

Sometimes, you get tempted to only repay the minimum amount you have on your credit card each month, but this comes with consequences. Paying more than the minimum amount means you pay less interest and it will also help improve your credit record.[/vc_column_text][/vc_column][/vc_row][vc_row el_class=”seo-link-sec”][vc_column][vc_empty_space height=”50px”][vc_column_text][slick-slider category=”28″ design=”design-5″ speed=”2000″][/vc_column_text][/vc_column][/vc_row][vc_row el_class=”call-out-sec stretch-sec” css=”.vc_custom_1568018042545{background: rgba(0,0,0,0.88) url(https://imbonline.co.uk/wp-content/uploads/2018/07/counter-wrapper.jpg?id=1382) !important;background-position: center !important;background-repeat: no-repeat !important;background-size: cover !important;*background-color: rgb(0,0,0) !important;}”][vc_column][vc_column_text]

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Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of our Independent Mortgage Brokers to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisers working for or with Independent Mortgage Brokers are fully qualified to provide mortgage advice and authorised and regulated by the Financial Conduct Authority. All our independent Mortgage Brokers will offer advice specific to you and your needs and circumstances. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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