Credit has now become an important part of everyday life. Generally if you apply for any form of credit from a mortgage or bank loan to a mobile phone contract or pay monthly car insurance the provider will first review your credit rating to understand whether it would be a good idea to lend to you or not.
Most lenders make a judgement about your credit rating by using a number of different criteria. However one of the main sources of information about you that they will use is your credit file. This is a record of your history of taking and repaying credit during the past six years including any missed payments, default notices or CCJs (County Court Judgements) that have been issued against you.
If the information on your credit file is poor or if you have recently used a debt management solution it may be impossible for you to get new forms of credit until you have taken steps to improve your credit rating.
Getting a copy of your credit file
The data about all your credit agreements that have been active in the last 6 years and various other personal information is recorded by the three major credit reference agencies. The information they hold about you is collectively known as your credit file. You can get a copy of your file from one or all of the reference agencies. Generally speaking requesting a copy of your Statutory Credit File is sufficient for understanding good or bad your credit rating might be. Details about how you get your file and the information it will give you it is available here.
How is your credit rating calculated?
Although it is a commonly used term there is actually no such thing as a specific credit rating which you can have and on which lenders base their decision about whether or not to lend to you. In reality each lender will simply compare the information available in your credit file and other sources to their own specific lending criteria. Whether they lend to you or not will depend on if you meet their specific lending thresholds. Further details about how lenders decide to offer you credit is given here.
How debt management solutions affect your credit rating
There is no doubt that if you are struggling to repay your debts and you start a debt management solution such as a DMP, IVA or declare yourself Bankrupt your ability to get any new credit will become worse. However it is important to understand that if you have debt problems your credit rating will probably become worse anyway. Most people who start a debt management solution actually have a very poor credit rating before the set up the plan. Further information about this is available here.
How to improve your credit rating
If you have had credit problems in the past or have used a specific debt management solution which is now completed there are certain actions that you can take to ensure that your credit rating improves as quickly as possible. More information about how you can do this is given here.