The old piece of advice, neither a borrower or a lender be, simply does not work in the modern world. You will almost certainly need to borrow to buy a home or a car and most people expect to borrow when they buy anything costly like a mobile phone.
Borrowing, or buying on credit has become central to the way the world works. But things can go wrong with credit. At Continuum we are looking at what it means if your history is less than perfect, and what you can do about it.
Every move you make
For many years virtually every business in the financial sector has shared details of financial transactions and relationships with every customer or client they work with. This means that the loans you have taken out and the way you have repaid them has been recorded as your credit history. It is not just repayments. Things like County Court Judgements (or CCJs) will be flagged up, and even being late paying utility bills will see your tardiness recorded on your credit history.
Credit bureau exist to let this information be shared with any business that has a legitimate reason to see it.
This means that even if you have never approached a particular lender or other financial service before, they will have access to your full financial history. You can’t simply go elsewhere and start with a clean sheet. When you apply for a new loan or other credit arrangement this history will be carefully examined.
It is used to build up a credit rating, which is a single figure used to sum up your credit worthiness, based on your credit history. The lower the figure you score on your rating, the more problems you may have.
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Organisations providing credit will base their decisions on risk. If you have a good history, with a series of loans and credit agreements that are always paid up on time, you will be seen as a good risk. This means that they are likely to agree to advance the credit you want.
If on the other hand you have a history of late payments, or payments that have not been made at all, the lender will believe that there is a greater risk that you will not be paying them. A greater risk means that the interest rates you are offered may be higher and if the risk is seen as high enough, the lender may not be prepared to lend to you at all.
With credit being central to the modern world, this can be a serious problem. Even if you do not need to arrange a mortgage or take out a car loan, you may find it difficult to do things like pay your car insurance on a monthly basis.
This may not be the end of the issues caused by a damaged credit history. Many employers now look at credit scores before hiring staff. You might find yourself qualified for a position but not hired, because employers are using credit scores to judge how responsible a potential employee is. If they are not capable of managing their own credit, it raises questions over their ability to handle the responsibilities of the job they are applying for.
What can you do if your credit history is compromised?
It is possible to find lenders and even mortgage companies who will make advances even if your credit history is poor. Bad credit loans and secured credit cards can be arranged in all but the most extreme cases, but you will find that you will pay high amounts in interest as well as additional fees simply due to the fact that your credit history has some downturns.
The answer is to start repairing your credit rating. Paying off any loans you currently have precisely on time is vital, but you may need expert help to get back on the right track.
At Continuum we can help with solutions like access to specialist mortgage products for people with a compromised credit history and with individual financial planning that can help you manage your money more efficiently.
So if your credit history is causing you problems, start looking forward to a better future with a call to Continuum.
The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable mortgage product, you should seek independent financial advice before embarking on any course of action.
Your home may be repossessed if you do not keep up repayments on your mortgage.