Having a bad credit score can have a huge impact on your life and could make a big difference when it comes to future life decisions, such as getting a mortgage or even a mobile phone contract. We understand that having bad credit can be stressful and that it can be hard to get on the path to a good credit score - and we’re here to help.
At Aqua, we want to help you to get back on track with credit just like we’ve helped other people. Let’s look at some of the most common challenges with poor credit and what you could be doing to start turning a bad credit score into a more positive one.
Your partner’s finances
That’s because if you share financial products, the people you share them with can become ‘financial associations’, so lenders will look at both of your credit reports when assessing either one of you for credit. What this means is that if your partner has a poor credit score, their score may have a negative impact on your ability to get credit.
How can you improve this?
The same goes for something like a credit card. Compare your credit histories to work out which one of you has a better score – the person with the higher score is likely be the best person to take out the card.
One of your biggest priorities should be working out what factors are affecting your credit scores and doing what you can to increase the score. You can read more about fixing a bad credit history in our handy how-to guide.
Although, working on your finances as a couple can be easier said than done. If you’re finding it difficult to speak to your partner about money, the Money Advice Service has useful guides to help you navigate this sensitive subject and get on track financially as a couple.
Mobile phones and other household items
Getting a mobile phone might not seem like a big financial agreement but the contract provider will still run a credit check on you to work out whether you’ll be able to pay your contract each month. Though the criteria are usually a lot less stringent than bigger credit products, such as a mortgage, poor credit will still likely result in you being turned down for the phone contract.
The same will apply if you are looking to buy a home appliance through finance, such as a fridge or washing machine.
How can you improve this?
For mobile phones contract issues specifically, you can look to pay-as-you-go (PAYG) deals as an alternative. This can be a good option if you have an old phone you can carry on using or if you have the cash to buy a new phone outright and then do PAYG with the new device.
With household items, your best bet is to buy second hand with cash. Consider online resources, such as Facebook Marketplace or eBay, to find items local to you.
However, if you want a job in finance or handling money, it’s likely that the employer will run a credit check. This is generally to protect against fraud, but a poor credit score will often be enough to rule you out of the running.
What can you do?
It’s important to remember that the ultimate decision on who gets the job is rarely based on the result of the credit history checks. If during the interview process, your credit score is flagged as an issue, don’t lose hope. If you are honest and can show you have made positive steps towards improving your credit score, you may find that the employer will still consider you for the role.
It’s worth bearing in mind that some financial institutions, such as banks and building societies, will likely be running automatic processes to assess candidates and their CVs. This means that the automated system will reject your application automatically if it doesn’t meet their criteria or pass their credit check.
Getting a mortgage
‘Bad credit’ mortgages, also known as ‘subprime’ mortgages, work in the same way as any other mortgage though you will likely need to take a couple of things into consideration:
1) A higher deposit
You should expect to have fewer mortgage options to choose from. Not only will your options be reduced, but they are also likely to be more expensive, charging a higher rate of interest than many of the rates you see advertised on the high street.
What can you do?
Most mortgage brokers offer a free initial call to figure out what borrowing and rates could be available to you. Take advantage of this and speak to several advisors from different brokerages before making a decision. This way, you’ll get a better picture of the rates and loan amounts available to you.
Many mortgage advisors work on a commission basis – where the mortgage provider, such as Barclays, or HSBC, pays the advisor a percentage of the total loan taken out – but it’s best to still check whether the advisors charge any additional fees for their service.
If, after speaking with several mortgage advisors, your options are looking drastically more expensive or requiring a higher deposit, you could also consider a guarantor mortgage. A guarantor mortgage is where a family member or friend with a stronger credit history will co-sign the mortgage and bind themselves to the agreement. If you don’t keep up with repayments, by law your guarantor will have to pay it.
There will still be credit checks in a guarantor mortgage, and this includes you, your guarantor and whoever else is on the mortgage. And you’ll usually be asked to put additional collateral against the mortgage, often the guarantor’s property.
Getting a loan
What can you do?
You’re still likely to have options open to you, so make sure you explore them all in detail and only apply for loans you are likely to get a ‘yes’ to and can meet the conditions of repayment. Each full application you fill in will result in a ‘hard search’ on your credit report so it will show up on your credit report.
If you are already an Aqua customer and looking to consolidate debts, our personal loans could be for you.
Renting a property
If you are identified as having a bad credit rating, they’re likely to assume there’s a higher chance you won’t be able to pay every month. In these circumstances, landlords could be less likely to allow you to rent their property.
What can you do?
Being upfront and honest with your potential landlord right from the start is the best place to start. Have a conversation with them to explain the reality of your financial situation outside of just the numbers that are going to come back in your credit report. Remember, lots of people have a history of bad credit and there’s more to everyone than a credit score.
Sometimes offering to pay a few more months in advance can also tip the landlord in your favour and allow you to rent your property.
Other options include getting a guarantor, which works in the same way as it does with a mortgage, and if you have previous landlords, a good reference will go a long way to help build your case.
How can an Aqua card help?
We can help you start your journey to building a better credit score when you manage your account well. Our most popular credit card, the Aqua Classic could help improve your credit history. We continuously monitor your account and could even offer to increase your credit limit after four months of good credit behaviour.
Reduce your rate over three years if you stay within your credit limit and pay on time. Want a longer-term solution? Aqua Advance reduces your interest rate over time. Keep making your payments on time and stay within your credit limits, we'll drop your interest rate every year for three years. All while you build a better credit score!