Adverse Credit – We've All Heard Of It, But What Does It Mean?
If you're one of those lucky people who have never missed a single credit card or loan repayment, then you don't need to worry about the term ‘adverse credit'. In this article, we are discussing the ins and outs of the term ‘adverse credit', something that describes people who have defaulted on credit repayments to a significant extent. The terms ‘sub-prime and ‘poor credit' are also used to describe the same situation. What we are here to ascertain is: what do you have to do to be called an adverse credit customer, and where does the lender get their information about you?
To start off, we will discuss the credit reference agencies, companies such as Experian and Equifax who collect and store information about all your financial dealings, and sell this information to lenders. Other parties that can see your credit history are insurance companies, banks, landlords, government agencies and employers, they are allowed, by law, to see your past financial details.
They know a lot about you, you may be surprised at just how much. Apart from the obvious (your name, date of birth, social security details), they also have your addresses (past and present), records of all the jobs you have had and with who, your entry on the voter's roll, your mortgage, credit card, loan and hire purchase details, records of any unpaid County Court judgements, and most surprisingly, details on all the loan and credit card applications you have ever made.
So where do the credit agencies get their information from? They get it from the Public Records offices and the financial institutions themselves – banks, credit card companies etc. Once you've got a bank account, you're on the computer records and the credit agencies start collecting information about you.
Experian, Equifax and the other agencies also offer another service to the lenders, they have the facility to give you a credit score, using the lender's own criteria to score your eligibility for credit. If you don't score high enough, you may not get the credit you have requested, which is why your credit score is so important. The credit score works by matching your financial details against different criteria. You could score well for having met all your credit card repayments for example, but score badly because you have moved address or employer a number of times. In any case, the higher score, the more likely you will get the credit you asked for.
The eventual credit score is providing an estimate on your eligibility to receive the credit, making the general assumption that your future repayment habits will be the same as your past. As extra insurance, they also compare your information with other applicants with similar characteristics as you, to see how they fared. In the end, the decision whether you can be offered credit is automated, and based on statistical analysis. If your score is close to the pass level, then the lender may choose to offer you a lower level of credit, or a higher interest rate.
All the lenders have different ideas about what is and isn't acceptable, and some will refuse your application without giving you a reason why. It's their decision, and it is not up to the credit reference agencies, they merely collate the information in the first place. It is the lender who gives you the label of ‘adverse credit' customer.
We have collated here a list (in no particular order) of the situations that will, either alone or with others, make it difficult for you get to credit with a lender: if you're behind on payments for a loan, credit card or mortgage, if you have made a few late payments on the above, outstanding and unpaid County Court or High Court Judgements, if you are not on the electoral roll at the address you gave on your application form, and if you have made more than a usual number of loans and credit card applications. Two situations would normally result in automatic refusal: having had your home repossessed, and recent bankruptcy.
If you are aware of any of the aforementioned problems in your recent credit history, then don't be surprised if your application for credit is turned down, especially by the big, mainstream lenders. Some of the mainstream lenders are a bit more forgiving about mortgages, especially if you already have a mortgage and are meeting your repayments.
This article should contain most of the information you need to know about ‘adverse credit', and help you understand what the lenders consider to be a bad risk, and why. If the worst happens, and you find yourself unable to get credit because of an adverse credit history, then you will probably have to seek credit from a sub prime lender. If you fit their criteria, they will offer you credit, but it will be more expensive.
The most important thing to remember is: always keep up do your loan, credit card and mortgage repayments, don't pay late or even more importantly, don't build up arrears. The financial consequences of getting behind could be both extensive, and expensive.
Avoiding Bad Credit and Repair
Staying in contact with your payments each month can help you avoid bad credit. If you research the marketplace before coming to a purchasing decision, you are well on your way to avoiding bad credit and repair credit hassles.
You want to consider all applications, including credit cards, student loans, mortgages, and car loans carefully to avoid being overcharged. Making the wise decision ahead of the game is the ultimate solution to maintaining good credit.
Most people when taking out a home mortgage loan are not aware of the options available to them. Many will walk in the bank door, fill out the application, and accept the terms & conditions when offered to them.
If you ever heard the many reports that swept the pages of newspapers, television and other advertising sources…families and individuals are filing bankruptcy because they cannot afford their homes anymore. This is because these people did not take the time to check the marketplace first and searching the options available to them.
As you can see, the millions reported are in debt and searching for a way to repair their credit. The solution then to avoiding bad credit and repair is to research, invest wisely, make good decisions, and budget. Being informed and educated is two of the best tools offered to us.
There are mortgage loans that offer overpayments and underpayments and these loans include vacation packages and lump sum payments to the borrowers. There are also other loans available that offer low mortgage monthly installments and low interest rates with insurance policies attached that will pay your mortgage if you are sick, unemployed, in an accident and so on.
On the other hand, there are mortgage loans that have high interest rates, high mortgages, and balloon payments attached. When balloon payments are attached to home mortgages it is almost guaranteed in a few years you will be searching for a solution to repair your credit.
There are very few home lenders willing to tell you the truth about the variety of home loans available. Most of the lenders are making money and you are a source of income. It is important to scope the terms & agreements carefully as well as reading all fine print on any loan contract before you sign. If you want to avoid bad credit and repair, you want to stay on the right path.
Loans are agreements that are made between two parties and attached are interest rates and other fees. If you are applying for a home loan and want to avoid bad credit, it makes sense to learn what the fees include and how much those fees are.
Anytime you take out a mortgage loan there are upfront fees attached. In some cases, you can get a home for little or no cost. Searching the marketplace can save you time and money.