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(The Credit Reference Agencies referred to are international and have excellent websites for global customers at www.experian.com and www.equifax.com which contain  links to their own sites specific to different countries.  The information on this page otherwise applies specifically to residents of the United Kingdom though much of the information may provide a useful guide even in other jurisdictions. )

Your Credit Status

Introduction

Most people rely on some form of credit - a mortgage, credit card, car loan, overdraft.   Before a lender grants a loan they examine certain details about you and give you a "credit rating".  If your rating is good enough, you get a loan;  if not, they will refuse to lend you cash or grant you a credit card but that is not quite the end of the matter.

Be aware that every time you apply for credit, the lender will search your personal file held by credit reference agencies, and every search is recorded on your file.  Many people are are not aware of this, or even that such files exist.  Records of several searches on your file will raise questions about "over-commitment" or even, if there are a great number, lack of responsibility or possibly fraud.  

However, if you are experiencing problems there are several steps you can take to improve your own credit rating (more about this below) and improve your chances.  Your credit status may not always be the cause of a refusal - it may be insufficient information, so it is always worth contacting a lender to see if there is more information that you can contribute which may make a difference.

"Non Status"  is a phrase used to describe  a situation where there is a non-existent, impaired or low credit history.  Ex-patriates returning from employment overseas, for instance, may have no credit history in the UK which may be a problem, but there is much you can do to improve matters - see "Help Yourself" below.  Impaired or low credit history may include County Court Judgements (CCJs), Arrears, an Individual Voluntary Arrangement (IVA), Insolvency or past Bankruptcy. 

In the UK every lender has a different system of "scoring" a credit rating, which is confidential, but the sort of information they look for is designed to give them confidence that you, your lifestyle and financial history make you a good "credit risk". 

 Your Credit Rating

The kind of information a lender will need to decide whether or not you are a good credit risk, will include the following:

• Your age
• Your occupation
• Your income
• Where you live (whether or not you own your home and how long you have been there)
• Current debt obligations
• Marital status

A lender will also consider the information on file about you at a credit reference agency (more about these below).  The details an agency will have on file includes:

• Electoral Roll information from your local Council - this is updated every month
• A record of all previous "searches" (known as "footprints") of your file which have been carried out over the preceding 12 to 24 months. Many abortive attempts to obtain credit simply adds to the number of entries (footprints) on your record, adversely affecting your rating still further.
• Existing and past customer credit agreements from lenders which are updated monthly (so late payments of credit cards, for instance, are recorded).
• County Court Judgements (CCJs) and Scottish Decrees, Individual Voluntary Arrangements (IVAs), Bankruptcies and Administration Orders.

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 Credit Reference Agencies

The two main credit reference agencies in the UK are Equifax (website: www.equifax.co.uk) and Experian (website: www.experian.co.uk).  You are entitled to know what information these companies have on their files about you (or your business if you are a sole trader, partnership, limited company) and they will send you a copy of your credit file for a £2 fee.  There are on-line application forms on each website that allow for credit/debit card payment of the fees, but for your assistance at the bottom of this page we include appropriate Enquiry Forms for mailing  - click on Enquiry Forms.  

It is recommended that you should check your credit files from time to time to ensure they are correct and if there are any errors you may send a Notice of Correction or an explanation of personal circumstances which may have caused problems with your credit history (see more on this under How to overcome existing problems below).

 Help your self

How to be a "good credit risk"

Here are a few tips which will help create a good impression:

• Ensure your name is always on the Electoral Roll at your current address
• If you are employed, ideally wait until you have been working for that employer for more than a year before applying for credit.
• If you are self-employed it can take a long time to build up a good credit rating so be sure to pay particular attention to the other "plus" points and if you are currently employed but planning to "go-it-alone", make sure you apply for any credit before you leave employment.
• Keep credit applications to a minimum
• If you are married, you are perceived to be a better credit risk by some lenders than if you are single
• Try not to move too often - living in one place for some time is a plus point.
• Pay your credit card bills on time.   Missed payments are recorded. 

It may seem strange - and rather unfair! -  but being a model citizen who has never borrowed any money, never had a credit card or had debts of any kind, could actually make it harder for you to obtain credit than someone who has a slightly erratic credit history.   Lenders are looking for a track record;  if you have none they have nothing upon which to base a judgement.   It may be to your advantage to apply for some sort of credit which would be readily granted (like an overdraft from your bank for instance) simply to establish a record, before applying for something more major like a mortgage or a credit card.

It pays to plan ahead.   If you are thinking about buying your own home at some time in the future, make sure you have a record of previous addresses and keep proof of residency (like utility bills) and be sure to make all current credit payments on time.

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How to overcome existing problems

 Re-mortgage your property

If you do not fit our profile of the perfect "credit risk" and you have experienced debt problems in the past or have problems now, all is not lost.   There are specialist lenders who specialise in "sub-prime" or "non-status" credit and will consider mortgage applicants who have "blips" on their records. If you have current debts which are causing you problems, and you own your own home, you may be able to re-mortgage your property, thereby releasing funds with which to settle your debts.  It may also be possible to arrange for a mortgage with better terms, so it is worth talking to our FSA regulated mortgage advisers. Complete the form on the right and they will be in touch with you direct and can advise you on what options are available to you with not obligation.

 Credit Cards

If you need a credit card facility for personal or business reasons it is possible to have one, provided it is secured by a suitable deposit:  please read our Credit Cards page. 

 Credit Repair

Don't be lured into spending money with various agencies promoting "credit repair"; there is no magic and there is absolutely nothing they can do for you that you cannot do for yourself.  Some things simply cannot be removed from your record - for instance a County Court Judgement.  This will stay on your record for 6 years from the date of the judgement, even if you have repaid the CCJ.   However, if you have repaid the CCJ, you should obtain a "Certificate of Satisfaction" and send a copy to the credit reference agencies so that it will be noted on your file - this obviously paints a very different picture to any lender searching your file.

Actions you can take to restore your credit rating:

• Correct mistakes.  Write to the organisation that provided the wrong or misleading information with an explanation and ask it to make corrections and inform the credit reference agencies accordingly.
• Add explanatory notes to your file explaining missed/late payments
• Bankruptcies:  if discharged contact the Official Receiver and ask for an official letter stating that your bankruptcy has been discharged
• CCJs:  as mentioned above, if the debt is paid obtain a Certificate of Satisfaction from the County Court and send copies to the agencies.
• Other residents at your address:  if any other person also lives at your address, you should create a disassociation so that you are not penalised for another person's bad credit history just because they also live at your address.

Actions you can take to build a better credit rating for the future, in addition to those listed under "How to be a good credit risk" above:

• Make all current credit payments on time
• Manage your bank account:  repay overdrafts and loans, even small ones
• Minimise credit applications:  only apply for credit when absolutely necessary.

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 Debt Counselling

If you feel you would benefit from debt counselling we suggest you contact your local Citizens Advice Bureau, the Consumer Credit Counselling Service, National Debtline or a bona fide money adviser. All these services are, of course, free and most firms of solicitors will give a free half-hour consultation for legal advice.

FEEDBACK:   Have you found this page interesting or helpful?   We should be very grateful for feedback, comments, questions or suggestions.  Please e-mail us by sending your comments on our contact form by clicking the following:  contact us.   Your e-mail address will NOT be passed to other organisations.

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Enquiry Forms

Copy the text from the appropriate forms below and paste into a document in your normal word-processing program, print and complete form in block capitals and post with a cheque or postal order for £2 per enquiry, to the addresses indicated.

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