10 Things That Might Be Affecting Your Credit File

Posted by Ben Ryland in Declined Credit on 15 May 2018 - Ben is a Senior Credit Analyst at checkmyfile.

At some point or another, pretty much everyone has their credit file checked. Whether you’re applying for a job, trying to rent a property, applying for a mortgage, loan or credit card or even comparing insurance quotes, the information your credit file contains will give potential lenders a detailed window into your credit history. It’s about so much more than just your score.

As it plays such an important part in everyday life, it’s vital to make sure you know for yourself what’s being reported. It also makes sense to check that all the information contained in your credit report is accurate - otherwise it could lead to complications when you need to rely on it most.

You never know what might be affecting your ability to get credit until you check your credit report. Try the UK’s most-detailed credit report FREE for 30 days, then for just £14.99 a month afterwards, which you can cancel at any time.

Here are some of the most common things that could derail an application for credit:

1. Late payments

A late payment marker on a credit account basically means that the payment was not made on time. For example, if your credit card payment is due on the 15th of the month and you pay it on the 16th, this would be enough to constitute a late payment and would be reported to one or more Credit Reference Agencies by your card issuer.

Late payments will be flagged up to potential lenders, although the negative impact of a single late payment alone shouldn’t be enough for future credit applications to be declined.

If you really want a squeaky clean payment history even a single late payment marker will stop that from happening. Setting repayments up using direct debit is a good way to keep on top of making payments on top, meaning you’re less likely to miss them.

2. Payment arrears

The odd late payment on a credit file is fairly common, but what happens if you miss a couple of payments in a row? Extended periods of non-payment will see your lender report this as payment arrears on your credit file. Payment arrears are often displayed using the numbers 2,3,4,5, and 6 denoting the number of months that the payment is outstanding.

See how arrears and other payment markers appear on your credit report

Payment arrears can have a much more significant impact on your credit score than a single late payment, which is why it’s vital to get back on track with your regular monthly payments if you do ever pay late – missing one month can quickly become two or three.

3. Arrangement to Pay markers

Sticking with the payment history bit of your credit file, if you have accrued payment arrears or are struggling to get a handle on your repayments, you may speak with your lender to discuss the best way forward. One option that might be presented is known as an ‘arrangement to pay’, which can act as a way to reduce your monthly repayments – perhaps to give you a bit of breathing space or to allow some time to clear arrears that have been building up.

While this type of action is admirable, it doesn’t come without consequence. If an arrangement is agreed, it gets recorded on your file as such and is very often viewed as a negative entry – potential lenders may interpret it as meaning you are unable to manage monthly repayments within your credit agreement. The effect is quite serious and if your credit file shows an arrangement to pay you may well see that your overall credit score and rating is much lower than you expected.

4. Defaults

A defaultis among the most serious negative markers to have on your credit file (the most serious being a 'Repossession' marker), and it indicates that payments were not made as outlined in the credit agreement to such an extent that the lender took the decision to end it and request repayment of the debt in full. This will remain on your credit file for a period of six years (as will any late payment markers) and could dramatically affect your ability to get credit elsewhere.

A default has a substantial negative effect on your credit file, which gets compounded if you have more than one account which goes into default on your credit file. Even if you are accepted for credit with a default notice on your credit file, you’re likely to be asked to pay a much higher rate of interest, which reflects the extra risk that any potential lender will be taking.

5. No Electoral Roll Listing

Back in the old days, lenders had very limited information to go on to determine if credit should be given or refused. Your relationship with the bank might have played a role, but being registered on the Electoral Roll was also a major deciding factor.

As times changed and payment history began to be shared, the importance of the Electoral Roll has remained a constant. Not only will an active listing at your current address have a positive effect on your credit file, it also helps lenders to verify your address as part of a credit application. Depending on the other information within your credit file, not being listed on the electoral roll could be the determining negative factor for some lenders.

6. CCJs

A CCJ (County Court Judgment), as the name suggests is issued by a court in response to a request by a lender or other organisation. It is often the final stage of debt collection and if you have a defaulted credit account that is not paid, the lender may take out a CCJ against you. The effect on your credit file is considerable and your credit score will take a nose dive if a CCJ is recorded on your credit file.

CCJs can not only make it extremely difficult to get credit, they can also affect your chances of renting a property or even getting a job. Court information will stay on your credit file for a period of six years.

7. Insolvencies

Insolvency options are available for those who can see no way out of a debt nightmare. Though they really should be a last resort due to the consequences, if it is the only option, the insolvency will be reported on your credit file for up to 6 years (longer if it is not discharged).

Many lenders will have strict policies for credit applications from those who are insolvent, and the amount of credit which can be borrowed can also be restricted. The negative effect of an insolvency on a credit file is as bad as it gets.

8. Financial associations to other people

Whether it’s knowingly or otherwise, there may be a financial association with another person on your credit file. This is not an inherently bad thing and it’s something that commonly happens as a result of opening a joint credit account with someone.

The way the other person manages their credit could also impact your own credit standing (for better or worse, depending on how you compare). If you then make a credit application, the lender may search the credit file of your financial associate as well as your own which could influence their lending decision either way.

Financial associations will not automatically remove themselves from your credit file after a certain period, so another’s credit history can affect you indefinitely. If it’s no longer applicable, getting a financial association removed from your credit file is a relatively simple process – moreso if you are a checkmyfile subscriber.

9. Alias names

If you’ve ever been known by another name, if you’ve ever used a slight variation in your name (some people choose to go by their middle names, for instance) or if a lender has ever made a spelling mistake when entering your name, it’s likely to show up on your credit file as such.

If you change your name with a lender, often your previously held name will be reported on your credit file as an alias. This ensures that any information held under the previous name is returned on a credit check and you don’t lose any information recorded under that name.

If you’ve recently changed names, it’s worth checking that everything has been updated accordingly.

10. Credit searches

For as long as there have been credit reports, there has been the popular misconception that searches by lenders on your report affect your ability to get credit. This absolutely isn’t the case and unless you’re applying for credit en masse and end up triggering a fraud warning, you’ve got nothing to worry about.

The only credit searches to be wary of are the ones carried out by debt collection agencies, which remain on your report for two years. This type of search indicates to potential lenders that you’ve failed to make payments in the past and it has since been escalated.

To see what’s on your credit file, you can try checkmyfile FREE for 30 days, then for £14.99 a month afterwards, which you can cancel at any time. You’ll get complete access to the UK’s most detailed credit report, letting you see what lenders see.

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