How a bad credit rating affects you

0
Written by:
28/02/2015
Have you ever been overdrawn without arranging an overdraft first? Have you ever missed a scheduled monthly payment, whether intentionally or not? Have you forgotten to re-establish direct debits after moving to a new bank account? If so, then your credit rating has almost certainly been negatively impacted at some point.

A good credit rating is part of parcel of being able to secure borrowing at lower rats of interest, particularly for a mortgage. This has become more important for securing a mortgage since the financial crisis, as banks moved to make their lending criteria more stringent. A poor credit rating therefore represents a real risk to your chances of buying a home.

A bad credit rating can also damage your chances of renting a home, too. This unfortunate reality is little acknowledged – but landlords and estate agents can check a potential tenant’s credit rating and may turn away high risk tenants.

What can you do about a bad credit rating?

If your credit score isn’t good, then fret not – there’s still a chance you could secure a mortgage, and this state of affairs isn’t necessarily permanent.

For instance, you could;

  • Get a mortgage with a bank or building society with which you enjoy an existing relationship
  • Build a significant deposit; if your deposit is big enough, then some lenders will be willing to pay less attention to a credit score
  • Investigate lenders that specialise in lending to consumers with low credit ratings

If you’re looking to rent with a low credit rating, you could;

  • Offer to pay in advance (half a year, say)
  • See whether the landlord or agent will accept you on the basis of a guarantor (a home owning relative, for instance)

If and when you’re accepted, give your landlord no reason to doubt your financial integrity; ensure that rent (and any other charges) is paid on time and in full every month. This not only maintains confidence, but can also improve your credit rating.

You can also consult the Your Money guides ‘Ten ways to give your credit score a boost’, and ‘Five ways to improve your credit rating’.

For more, read here.

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Your right to a refund if travel is affected by train strikes

There have been a wave of train strikes in the past six months, and for anyone travelling today Friday 3 Febru...

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

How to help others and donate to food banks this winter

This winter is expected to be the most challenging yet for the food bank network as soaring costs push more pe...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week