Article Categories
» Arts & Entertainment
» Automotive
» Business
» Careers & Jobs
» Education & Reference
» Finance
» Food & Drink
» Health & Fitness
» Home & Family
» Internet & Online Businesses
» Miscellaneous
» Self Improvement
» Shopping
» Society & News
» Sports & Recreation
» Technology
» Travel & Leisure
» Writing & Speaking

  Listed Article

  Category: Articles » Finance » Article
 

Adverse Credit - When is a credit history labelled as being "adverse"?




By Michael Challiner

If you are a borrower with a history of unsatisfactory credit transactions, the lenders will describe your credit history as "adverse". The expressions "poor credit", "bad credit" and "sub-prime" all describe exactly the same situation. This leads to a number of questions; what credit information is collected about you, where does it come from and how bad must your credit history be for it to be labelled as "adverse"?

It's the credit agencies like Equifax and Experian which collate information about you and then process it. They are then legally entitled to sell the information to anyone with an authorised purpose as defined by Law. This includes banks, building societies, credit card companies, other lenders, landlords, employers, any government agency and anyone you have ordered a product or service.

And you'll be simply astounded what information the credit agencies hold about you!

A typical computer file will store your name, address, date of birth and social security number. It will also include your previous addresses, whether you are registered on the voters' roll, details of your current and previous employers. They also hold crucial information relating to your monthly payments on your mortgage, hire purchase agreements, loans and any credit cards you have. Then their computers will store information from the public records. If you have any Court judgements in respect of your debts, then the details will all be on their files. The file is topped off with details of all the times you apply for credit.

All this data is gathered from two chief sources: the Public Records offices and records supplied by financial institutions from throughout the UK. You can't escape their watchful eye. Quite honestly, the agencies are recording your credit history from the first day you show on their computer screens.

The credit agencies then sell this information to anyone to whom you've applied for credit. As part of their service, they'll also credit score your data. This enables your lender to make a statistical based decision whether to award you credit. So within this credit vetting process, your credit score becomes crucial.

Under credit scoring your credit history is statistically judged and awarded a number of scoring points. The more points you have, the better your credit rating. These points measure the probability that you will repay any credit provided to you. The system is based on the principle that it's possible to predict your future credit performance by examining your credit history and statistically comparing it with the performance of other applicants who have similar characteristics. The points score allocated to you then makes it possible for your prospective lender to calculate the level of risk in your application and lessen the element of subjectivity in their lending decision.

So now we revert to our first question - When is a credit history labelled as being "adverse"?

In practice it's not the credit agencies but the lender that decides. Each lender has it's own lending policy through which they define the level of credit risk which is acceptable to them. If your credit score reaches a certain level, then you 'pass' their credit screening. If you don't score sufficient points, the lender may either refuse your application or offer you a smaller sum than you had applied for or offer you a higher interest rate. The decision is always theirs - after all it is their money! But as lenders each have different lending policies, your credit score could be acceptable to one but not to another.

However, we can tell you some of the main "black marks" that will harm your credit score - the last two being by far the worst:

    You're not on the Voters Roll where you claim to be living. Multiple applications for credit Payments that are over 30 days late on your mortgage or other loans Arrears on your mortgage or other loans County or High Court Judgements for debt Repossession Recent Bankruptcy (undischarged bankrupts will always be refused credit)

Lending policies are central to a lenders business and as such are highly confidential but on mortgages especially, some will indicate that certain black marks might be acceptable.

All things considered, by reading this article, you should know if there is a likelihood that you will be judged as an "adverse credit risk", But in the end you cannot be absolutely sure unless you've been refused by a main line lender. If you do get turned down you'll have to apply to a sub-prime lender who is more likely to accept you, especially if you own your own home - but you'll definitely be charged a higher rate of interest for the privilege.


All in all, it's essential to build up a good credit profile that will reflect in your credit score. This then gives you access to a wide range of credit facilities at reasonable interest rates. So please remember, if you need a loan, make sure you can afford it before you sign up and then maintain a perfect payment record.


 
 
About the Author

Michael writes for Brokers Online who offer Critical Illness and most UK financial services including unsecured loans. Visit our family finance blog for useful tips on uk finance



Article Source: http://www.simplysearch4it.com/article/20121.html
 
If you wish to add the above article to your website or newsletters then please include the "Article Source: http://www.simplysearch4it.com/article/20121.html" as shown above and make it hyperlinked.



  Some other articles by Michael Challiner
Life Insurance premiums put the squeeze on fat people
Once again overweight people are in the firing line. Life insurance companies are raising premiums up to 400% for fat people. They've always charged more for those who clearly over-eat, but during the ...

Mortgage Payment Protection Insurance 11 Top Tips
A mortgage is a long-term financial commitment and you have to maintain the monthly repayments for the full duration of the mortgage. That's going to be over ...

APR, AER and EAR are terms used in financial advertising. What do they mean?
Have you ever scanned the acres of financial advertising and wondered what APR, AER and EAR really mean? You'll invariably find one or another of these terms in every advertisement for a lending or savings ...

ReMortgaging - can it still be worthwhile?
Mortgage lenders have a somewhat insulting name for people who switch lenders to for lower interest rates – they call them "Rate Tarts". The author has a ...

Big changes on the horizon for Critical Illness Insurance.
In recent years sales of critical illness insurance have flagged. The primary cause is the huge 70% increase in premiums ...

Life Insurance - Why does the UK have a 2.3 trillion protection gap?
According to Swiss Re, one of the world's largest re-insurance companies, less than half of the UK population has ...

  
  Recent Articles
Tenants With Poor Credit Even Enjoys Loan
by Turk Malloy

The UK Consumer's Guide to Shopping for Car Insurance Online
by Mary Simone

Are You Throwing Your Money Away?
by John Cranley

Easy personal loan to finance your desire!
by frank howard

Bad credit consumers can still find sources of financial assistance
by Martin McAllister

Setting up a Merchant Account
by John Tillman

Individual Voluntary Arrangement: How Does It Work?
by Martin McAllister

Stop Foreclosure - We buy houses
by Ron victor

Tax foreclosures property investment could be a nightmare investment
by mike

Spotting tax foreclosure property in USA
by mike

Making money online is virualy free
by Phill Evans

Online Criminal Background Checks: Importance & Ease
by Asel Retrac