Bad Credit Loans

Late Payments

Failing to pay back loan instalments on time will negatively affect your credit score, as this indicates that you potentially aren’t a responsible borrower. To avoid this, make it a priority to pay your instalments back on time each and every month.

The Electoral Register

Because lenders use the electoral roll in their verification process to identify you and where you live, so it’s important to ensure that your details are present there and that they’re up to date too. Otherwise your application is much more likely to be rejected, which can then cause further issues down the line in regards to your chances of being accepted for other credit applications.

Declaring Bankruptcy

Declaring bankruptcy will significantly affect your credit rating, as will the usage of an Individual Voluntary Agreement (IVA), which is an agreement between yourself and your creditors to pay all or parts of your debts via regular payments. This is where you arrange to make payments to an insolvency practitioner who will then divide your money between creditors. Bankruptcy will appear on your credit file for at least six years too.

County Court Judgements (CCJ)

If you’re always paying your instalments in full and on time, you’ll never need to worry about being the subject of a County Court Judgement (CCJ). A CCJ can be issued against you if a creditor believes that you are unable to repay your debts. They can apply to the courts and if they agree, you’ll receive information about this via the post. 

At this point there are a few options for you to choose from such as repaying the full amount back immediately, asking for a new instalment schedule or disputing the claim itself. It’s important to note that the CCJ will remain on your credit file for six years, unless you pay the amount off in full within a month of it being issued or you successfully dispute the CCJ itself. 

No Credit History

Your credit score will also be adversely affected if you’ve never actually taken out a credit card or had any kind of loan. So your credit score is classed as ‘bad’ because it doesn’t exist and as such, lenders have no credit history to analyse to determine whether you will pay off any money that you borrow on time or not.

Check Your Credit Score

Before beginning the application process for any loan, it’s important to check what your credit score is currently. You can get free copies of your credit report from Experian, TransUnion and Equifax (The three main credit reference agencies in the UK). 

It’s important to review the credit score and the details of the report itself to see if you can identify any patterns with missed payments and closed accounts in your credit history. You should then look to take the necessary steps to improve your credit habits in the future. 

You should also review the report to determine if there are any instances of information that you believe to be there in error. Because you may have the right to dispute these credit report entries and have them removed from your credit history.

Budget For Repayments

It’s important to consider if you can afford the monthly repayments before applying for and agreeing to take out any loan. After all, if you fail to repay any instalments, this will likely damage your credit score further. You can use our handy calculator to help you to determine what your monthly repayments will be depending on the overall loan amount and the interest charged.

It’s also important to look out for lenders that charge origination fees. These fees are usually charged upfront by lenders to cover any miscellaneous costs. However we do not charge origination fees here at One Stop Money Shop and it’s completely free to apply for a loan. We will only charge you interest for taking out the loan and all the details surrounding this will be presented to you prior to taking out the loan, enabling you to make an informed decision.

Build Your Credit History

If you’re in a position where you have little or no credit history, it’s important to take steps to build your credit score. There are various ways to do this, but one of the simplest solutions would be to take out a credit card and use it to make smaller purchases throughout the month (on items you were going to buy anyway) and then pay them off once your next payday comes around.

Register On The Electoral Roll

By law, you must be registered on the electoral roll, even if you aren’t planning to vote. But it’s important that the details on the electoral roll match your current circumstances. Be sure to check these details, especially if you’ve recently moved houses.

Don’t Miss Payments

It’s really important you don’t miss payments when it comes to your direct debits, rent/mortgage payments or any existing loan repayments. Your payment history is one of the most important factors when it comes to your credit score and by having a long history of on time payments, you can achieve an excellent credit score. 

Catch Up On Your Bills

If you’re behind on any bills, it would be a good idea to try and prioritise catching up with them. Whilst a late payment can stay on your report for up to seven years, having the accounts all current can have a positive effect on your credit score. Plus of course it stops further late payments being added to your account as well as any late fees on top of that. If you’re struggling with the management of debt, it could be a good idea to talk to a credit counsellor who may help you to negotiate with lenders and also set up a debt management plan for you.Longer Time to Pay

Instalment loans give you more time to pay back the money than short-term loans. You have several months or even years to repay the loan, which provides you with breathing space to manage your finances, especially if unexpected expenses arise.

Limit Applications For New Accounts

Whilst you may need to open up new accounts to build up your credit score, you want to generally limit the number of times that you submit credit applications. This is because each application could lead to a hard inquiry which could have a negative effect on your credit score that just compounds even further, as more hard inquiries build up. Opening new accounts will also decrease the average age of your credit accounts, which could also hurt your score as a consequence.