Article by Beth Jennings - 5th January 2018

6 Things Lenders Don’t Want To See On Your Credit File

We live in a time when credit ratings have an ever-increasing impact on our lives. Mortgages, loans, car finance, phone contracts… almost anything that involves a degree of borrowing is likely to involve your credit report, or rather, the information it contains. A lot of information goes under the microscope during an application and unless you know exactly what you’re looking at, you may not realise which elements could be hurting your rating the most.

This article will try to get you caught up to speed on what lenders don’t want to see so that you can put forward your best when you next apply for credit.

1. Late payments

By missing a single payment on a credit agreement - which could be as little as being late by just a couple of days - you start down the road of negative markers and a bad Credit Score. If you have recently been declined credit by a lender, this is the first area on your credit file to check, as it’s one of the first things lenders will look at too.

Your track record in managing credit agreements in the past is the cornerstone of how a potential lender will assess any new application for credit. A single missed payment is understandable in a lot of cases, after all - we’re all human, but when these become a recurring theme in a file it indicates that the borrower can’t keep track of their payment dates. You will see these markers on your checkmyfile report as small 1s on your calendar.

One simple step you can take to try and avoid this is to set up direct debits online or in the local branch of your bank. You’ll then be able to rest easy knowing that at least the minimum payment has been made (provided sufficient funds are in the account) and your Credit Report will remain free of these negative markers.

2. Serious arrears

This is when negative information starts to have much more of an impact on your ability to get credit. The longer a payment remains in arrears, the more seriously it will be viewed by potential lenders. Being two months in arrears is where it might start to harm your chances of securing credit, and anything more is deemed 'serious arrears'.

Once a payment is two months or more in arrears, it can be dealt with by a lender's collection department.

Late payments will remain on your Credit Report for a period of six years, after which they will be removed automatically, however any outstanding loan may still be valid.

3. Defaults

Defaults are very serious and mean that a borrower has left an account unpaid for so long that the lender doesn’t expect to receive payment. Your account will be closed, the line of credit will stop and the lender will set about recovering the amount it is owed

The account being closed does not mean that you don't have to repay the debt. Having not filled your obligation to the lender to make your payments the lender is within their right to either sell your debt to a debt collector or pursue it through a County Court.

The presence of a default on your file means it will be difficult to be accepted for new forms of credit, and you will notice that your Credit Score drops significantly. Defaults will appear on your credit file for six years and will make getting credit much more difficult. Any lenders that are prepared to offer you credit are likely charge a much higher APR.

You will see any defaults marked on your checkmyfile report as a black circle with the letter ‘D’. Bear in mind that even if you settle the debt, the record of the default won't change or disappear until the default itself is removed.

4. Arrangements to pay

Here is where it gets tricky. Some people are under the impression that an arrangement to pay isn't a bad thing at all, as it shows that you are taking charge of your debts and communicating with your lenders to find a solution. Unfortunately this is not the case and an arrangement to pay marker will be viewed by some lenders in the same light as making a late payment or even defaulting on a credit agreement. The exact interpretation will vary from lender to lender.

Understandably this can make for uncertain ground for borrowers who don't want to ignore a debt, but for whatever reason cannot keep paying the agreed amount. Generally though, it is always better to speak to the lender concerned, as taking no action at all can quickly spiral out of control and result in even more serious action being taken.

5. Court Information

For a lender, the presence of court information is the single most negative marker that can appear on a credit file. The impact it has will depend on the exact nature of the entry, ranging from a CCJ, right up to Insolvency, but the impact will be severe and long-lasting in all cases.

Court information will typically remain on a Credit Report for six years and in the case of bankruptcy this is true regardless of whether you are discharged or not.

6. Missing Electoral Roll Information

Moving away from potential payment problems, your Electoral Roll listing is also reported and can have quite an impact on any credit applications you may make. Particularly in the absence of much of a credit history, if your Electoral Roll information is wrong or missing, some lenders might decline an application. As such, making sure you’re on the Electoral Roll is one of the most important things you can do to improve your chances of being approved for credit.

Even if you know you are registered to vote with your local council, you should still make sure that you are also recorded correctly on the credit reference agency version of the electoral register. Each agency maintains its own records, and so it's not uncommon for people to be missed off.

All lenders are different and have their own criteria when it comes to accepting or declining credit, and these pointers are just some of the more common factors that lenders will look at. In today’s day and age your credit rating is a vital part of life.

If you are unsure of anything, your Credit Report probably holds the answers. checkmyfile offers the most detailed Credit Report in the UK, you can try it free for 30 days, then just £14.99 a month and cancel anytime.

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