When you have a negative marker on your credit file, it can be it harder to obtain loans or finance. There are a number of marks which may be placed on your file, depending on your credit behaviour. Your credit report is there to protect you from taking on more credit than you need to and predicts your future behaviour. If you’ve recently received a default mark, a Country Court Judgment, have entered into an IVA or have been declared bankrupt, it can make it harder to get finance again. However, there are a few factors you should consider first to help increase your chances of getting approved for finance.
What is a negative marker on your credit file?
Your credit report will show your financial history and will outline all the payments you make back to finance companies and whether you’ve made the payment on time, a late repayment or missed a payment all together.
Defaults
A default shows up on your credit report when you miss a payment, and it has a negative impact on your credit rating. It doesn’t happen straight away though, but it is up to the lender to decide when they want to default your account with them. Usually if you have missed payments over 3-6 months, the lender will decide that you can no longer have credit with them. It can be harder to get car finance with a default on your credit file as it will be visible to lenders for up to 6 years. Defaulting on your accounts increase the risk to future lenders as you’re more likely to do it in the future too.
County Court Judgements (CCJ)
A County Court Judgement is a court order that demands you pay back the money you owe to a lender. CCJs are usually put in place after a default or after a number of missed payments to the lender and just liked defaults, they stay on your credit file for up to six years. However, you can remove a CCJ from your credit file if you pay off the full amount within 1 month of its issue. If you fail to pay, it can lead to more serious financial consequences such as debt consolidation loans and bankruptcy.
Bankruptcy
Bankruptcy is the worst marker you could have on your credit report but for some people, bankruptcy is their only option. It is the situation when you can’t afford to pay back your debts and your non-essential assets are used to pay off your debts. It’s a very serious option for those who can’t pay back what they owe and should not be taken lightly. You won’t be able to get any sort of finance or credit when you declare yourself bankrupt.
How to increase your chances of getting finance?
1. Reduce your debt
You can’t remove a default from your credit file, but you can work to pay off as much debt as you can. Your credit score considers how much debt you currently owe and making new habits to pay off your existing debt can help you in the future. Once 6 years have passed, the default will then be automatically removed from your account.
2. Removing a CCJ
If the negative marker on your credit file is a CCJ, there are options to have it removed. Once you’ve been served with a Country Court Judgement, you can remove it from your credit file by paying back the full amount owed within one month of the issue date. However for many people, this may not be an option when you have very high levels of debt. Just like a default, the CCJ will be removed by the lender after 6 years if you can’t pay it off.
3. Limit your applications for finance
It can be tempting to see who might offer you finance with a negative marker on your credit file and apply with multiple lenders at once. However, lenders will usually want to perform a credit check on you and many credit checks in a short space of time can harm your credit score even further.
4. Create new financial habits
Credit scores and negative markers are all about future predictions based on past behaviours. Lenders look at how you’ve handled money in the past and make decisions on your future finances. If you’ve been affected by any negative markers on your credit file, it can be time to get your financial life together and make new habits to improve your future finances. You should try to clear as much debts as you can and start to make any current payments you owe on time and in full, this can help to improve your credit score reduce your debts.
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