Your credit file is an important source of information for lenders and other financial institutions, and a bad credit rating can affect your life in a number of ways. Given that a default remains on your credit record for six years, it’s also a long-term issue.
An obvious scenario where a bad credit rating will affect you is when you’re trying to borrow money or secure credit, but it can also create problems when you’re looking for a job or making a rental application.
The problem isn’t insurmountable - a poor credit rating can be improved over time, so what are the most common situations where a bad credit rating might affect you? One of the more obvious is when you’re trying to borrow money.
Financial institutions use your credit file to determine their risk and guide lending decisions. It’s an important source of information in this respect, as it reveals your financial history and any repayment defaults or insolvency processes you’ve been through.
Even if a lender does grant an application, the cost of borrowing is likely to be much higher than if your credit rating was good. Your credit limit will also be lower, and the choice of financial products more limited. Essentially, the risk you pose to the provider determines whether they’re willing to lend, and if so, on what terms.
A bad credit rating could also affect existing loans if the lender carries out periodic reviews of their loan book. Under certain circumstances they might increase the rate of interest if they become aware of your poor credit rating, although they must inform you of this and their reasons for doing so.
You’re financially linked to someone else if you have ever held a joint mortgage or loan, or a bank account in joint names, and don’t officially ‘disassociate’ yourself with the credit reference agencies. The link could be with your spouse or partner, for example, but a poor credit rating can also adversely affect the ability to secure borrowing in their own right.
When you apply for a tenancy, the landlord or lettings agent may check your credit record to estimate your risk of default. If they see you have a poor credit rating, they may assume you’re a high risk and will be less likely to grant your application.
If you apply for a job in some industries - where you’re going to be involved in financial transactions or cash-handling, for example – the employer may check your credit file before offering you the job. This is purely due to the type of employment you’re entering, however, and isn’t common practice in recruitment generally.
For more information on how a bad credit score can affect you, and how to improve the situation, call our expert team at Scotland Debt Solutions for a free same-day meeting. We specialise in helping people out of debt, and will provide the unbiased professional advice you need.
The Register of Insolvencies is a public register that documents Trust Deeds until five years after the discharge date and includes personal details.
Joint Trust Deeds don’t exist, however, if you want to run a Trust Deed that encompasses debts as a couple, this will be two individual Trust Deeds.
Our Scottish based team can help advise you on your debt problems.