What is bad credit?
Bad credit is usually a way of describing having a low credit score, due to either a history of using credit poorly or not having built up much of a credit history. Having a bad credit history is one of the main reasons people are turned down for credit cards, loans, and even bank accounts.
If you have a bad credit history, it’s important to remember that millions of people in the UK are in the same category, so you’re not alone and you can get help to fix it.
It’s also important to remember that nobody has a single credit ‘score’ that all lenders look at to decide whether to give you credit. Each lender will carry out its own assessment based on your credit history and decide based on their own criteria, so it’s still possible for you to get credit and use it responsibly.
Let’s look at the two situations which usually result in it being more difficult for people to get credit
A bad credit history
If you haven’t stuck to the terms of credit agreements in the past, lenders might decide that it’s a risk to give you credit.
The most common ways that people break credit agreements are:
- Making lots of late payments or missing payments altogether
- Going over their credit limit – especially if it happens regularly
For example, if you made lots of late payments on your credit card or missed payments altogether, other lenders are likely to think that you might miss payments and decide not to give you credit. There are lots of steps you can take to start improving your credit score and options for getting credit while you have bad credit. At Aqua, we’ll do our best to help you with both.
No credit history
If you’ve never borrowed money, lenders don’t have much information to judge whether you’ll manage your credit well.
Using credit well is the most important factor in building a good credit history, so having no history of using credit can be just as much of an issue as a history of using credit poorly.
Make sure you’re on the electoral register
Lenders use the electoral register to check your identity against your application. If you’re not on it, it’s harder for them to make sure the application is genuine.
Pay your bills on time, including your monthly credit card payments
Missing a payment by a couple of days can make a difference to your credit score. Late payments can stay on your credit report for up to seven years.
Check your credit record
Regularly checking your report means you can keep on top of any issues and pick up any suspicious activity, such as signs of identity fraud.
Close old accounts and cancel old direct debits
An old account with a zero balance might feel like it’s not all that important but having a lot of unused accounts can negatively affect your score. If you don’t use it, lose it.
Do not make too many applications for credit within a six month period
Too many credit searches on your credit report in a short space of time can make lenders view you as a risk and reduce your chances of being accepted.
Use credit responsibly
Lenders like to see you can be responsible with credit, so managing your existing credit cards and loans well is one of the best ways to improve your credit score.
Can I apply for a credit card if I have bad credit?
The short answer is ‘yes’. The first step is to decide which card is right for you.
If you have a bad credit history or haven’t applied for a credit card before, it can be tempting to fill out lots of applications in the hope that at least one of them will be successful. But this is exactly the wrong thing to do.
Each full application is logged on your credit report, so the more you apply and are turned down, the more likely you are to keep getting turned down. That’s why you need to pick a card that’s designed for your circumstances and offers an eligibility check – sometimes called a ‘soft’ check – up front.