Tips and tricks on how to avoid bad credit loans in the UK

Credit score is the most important factor that will determine you’re financial stability to others i.e your creditworthiness. Your Credit score at the end of the day will determine the amount you will pay for a loan. The higher the credit score, the lower the loan interest payments and any other financial products payments will be. A bad credit score can be very painful and expensive. 

The global and the UK economy as well as financial systems runs on credit. A good credit score will be the ultimate factor which can save you thousands of pounds on your credit cards, car loan mortgage  and more.

How bad credit is treated in the UK?

A low credit score means you are Bad Credit and you are a risky person to lend to. This means lenders will only be willing to lend you at higher rates then they will be lending to people with good credit score.  Your bad credit will keep holding you back on each occasion when you will want to get a financial product. If it is a car loan, a mobile phone contract, a mortgage, or even something as simple as just opening a bank account.

Your bad credit means the interest payments will be much higher than they would for someone who has a good credit score. You  could be refused credit altogether as you are at a higher risk of not paying for your applied loan.

Bad credit can be a result and outcome from a wide range of transactions. We will try here to help and explain the factors that can adversely affect your credit score. As well as provide a few tips to help you avoid bad credit.

What factors affect your credit score?

Credit reference agencies, are the main bodies that calculate and determine your credit score. They will use complicated models with a wide range of factors. As well as credit harming transactions, there are also some elements that can hurt your credit score without any borrowing.

Some of the factors which influence your credit score are your age, your salary, how many kids you have, are you on the voters list, do you have a mobile, do you have any credit cards, how many credit inquiries you made and off course your payments for your loans and credit accounts.

The importance of your payments:

Your payment history is most important when determining your credit score. This will include all of the payments that you made on all of the credit lines, such as installment loans, mortgage, credit cards, and even mobile phone contracts. Late payments can severely damage your credit score, as well as missing payments altogether.

Actions that are taken as a result of late of missed payments, will also have an adverse effect on your credit score. This will include any debts being passed on to debt collection agencies, statutory demands, county court judgments (CCJs), individual voluntary arrangements (IVAs), debt management plans, debt relief orders, and bankruptcies.

Some examples of credit damaging transactions are:

  • Failing to make scheduled payments on time or totally missing them.
  • Failing to pay the HMRC, utility and other bills
  • Making the minimum repayments on credit cards
  • Open many credit card accounts
  • Withdrawing money from an ATM using a credit card (not Debit Card)
  • Making frequent credit inquiries with numerous lenders
How can you avoid having bad credit in the UK?

The clear answer is to pay your bills on time and make all the planned payments on your various credit lines. If you missed or have a late payment it could remain on your credit record for at least three years. This can happen even if you only forgot to make the payment, so this is definitely something to avoid. Here are a few tips how to avoid bad credit in the UK?

Shut down credit accounts you are not using

Lenders will be more unwilling to give you more credit if you have numerous sources of credit already. This is a pure risk reduction on their point; as it will reduce the possibility that you will be able to repay everything you owe. Shutting down old credit accounts and store cards will help to improve your credit score.

Don’t make many credit applications

You should do your research and apply to a single lender rather than making multiple credit applications too many lenders. This is why was established, as you only fill in one easy and user friendly application and we will try to find you your lender. It firstly will save you time, but mostly for us showing your application to our FCA approved panel of  top selected lenders. Your application will count as only one application. A person with multiple credit applications on their credit report will be perceived as someone who is desperate for credit, and will hurt your credit score.

Don’t move your residents that often

Lenders like to know that someone is stable but living in the same place for a long time. Someone who moves home often might have difficulties paying the rent or making their mortgage payments. Any credit application will typically ask for the addresses you have lived at in the last three years. These addresses will be listed on your credit report.

Shut down joint accounts with a bad credit score partner or spouse

For obvious reasons your credit score will be damaged by being in a joint account with someone with a bad credit score. Lenders will assume that your partner has an impact over your income and spending practices.

Register to vote

Verifying your address is highly crucial to prevent fraud and scams. Lenders and credit providers don’t care about your political opinion, but care about authenticating the address you put on your application forms. If you are registered to vote helps as proof of address. Contact your local council or visit if you are not on the voters list.

Check your credit report for errors

Sometimes when you know you will be in a need for future credit it is worth requesting and even buying a copy of your credit report. You can get your credit report from contacting one of the main three biggest UK credit reference agencies – ExperianCallcredit , and Equifax. Any discrepancies between your credit application and your credit report could hurt your credit score.