What is a credit history?
Your credit history is a detailed history of all
your debts and is tracked by credit ratings agencies in the UK.
These agencies compile your credit
history by gathering information from various places
such as your payment history, credit limits, high and
low bank balances, how much of your available credit
you use and even changes in your address and work
history.
This information is compiled to give
you a score which can then be used in turn by lenders
to work out if how much of a risk you represent if they
lend you money. As soon as you possibly can you should
start to build a credit history by opening a savings
account, paying your bills on time and not using more
than 30% of your available credit on your cards.
If for any reason you do get a bad
credit rating then it is not forever. You can clean
up your credit history by managing your debts and then
you can "re-age" your credit history after
seven years. This depends on you keeping your finances
in order. There are lenders that will lend to people
with bad credit histories, however you will find it
easier to find a loan at better rates if you have a
good credit history.
How do I get a bad credit history?
There are many different reasons you may have a
bad credit history which can make it difficult to borrow money when
you need to.
Understanding how your credit history is
compiled will help you to avoid situations which may result in you
earning a negative credit history. There are simple things you can
do to keep your credit history clean:
Keeping your credit history clean
- Do pay your bills on time - avoid making late payments on any debts.
- Do not miss payments or default on a debt - this includes your council tax
- Do pay credit card bills off in full at the end of the month
- Do monitor your accounts for identity theft
- Make sure you fulfil financial contract or commitments as failure to do so may be reported to credit reference agencies.
- Where possible do not change address or job too frequently as this can affect your credit history
- If you have defaulted on any debts make sure you clean up your credit history as soon as possible by honouring your repayment schedules
- Avoid bankruptcy
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