Nobody is entitled to credit, but there is a lot you can do to help improve your chances - but remember there’s no overnight fix. Clearly lenders want to minimise their risk.

If you can see no reason for being repeatedly declined credit then you should request your credit file immediately. You could be a victim of identity theft.

Before attempting to rebuild your credit you should be confident of your financial situation. Borrowing further, other than in some cases to consolidate or move credit, when you are in a difficult situation is rarely a good idea. There are budget forms for free on the site which will help you determine the amount of disposable income to service your debts. We strongly recommend you use one of these first.

There is a general rule of thumb that says if you are unable to obtain credit, 2 years of ‘good behaviour’ should enable you to get ‘simple’ credit (mobile phones, utilities, satellite TV etc) again. Good behaviour would generally mean maintaining payments on existing credit arrangements and settling defaults and CCJs.

There are 3 steps to getting back on the ladder:

• Repair your Credit File
• Maintain & Reduce existing credit
• Applying for the right types of New Credit

No ‘credit repair’ agencies work miracles – please don’t waste your money on scams like these. Anything they can do you can do yourself very easily. Most do two things:

1. Dispute all derogatory information on your credit file and hope that the lenders either do not respond, or do not respond in time. If this happens then the credit reference agencies have to remove the information from the file.
2. Deny the receipt of court paperwork relating to CCJ’s. This means that you can apply to have the case re-heard. If you are then successful in having the debt discharged or pay the judgement within a month the judgement will be removed from the register and therefore your credit file. Obviously if you received the paperwork this is illegal.

Most people get in to a ‘bad credit’ situation because they ignore their creditors requests for payment. Most large lenders have entire departments dedicated to dealing with borrowers that are unable to meet their repayments. They don’t want you to default on your credit agreement any more than you do, but if you ignore them it’s likely that they will.

The 3 most common ‘bad credit’ indicators are:

• Late payments: This is not normally too serious unless its over a prolonged period or if its happened within the last few months over more than one or two accounts.
• Defaults: More than one default is likely to seriously impact your ability to get unsecured credit. Remember that a default will remain on your credit file for 6 years. Defaults are either marked as satisfied (paid up) or not. Once a lender has defaulted a credit account they are likely to pass it to a debt collection agency to recover the debt.
• CCJs: The most serious of the three.  A CCJ, even for a small amount, indicates to lenders that you have deliberately ignored your creditors. Few lenders follow accounts through to this stage for smaller amounts unless you have wilfully failed to maintain agreed payment / reduced payment arrangements.

Generally if you have defaulted on arrangements, coming up with good reasoning such as ill heath / depression, loss of job and explaining why you did not communicate properly with the lender (i.e. that you thought there was nothing you could offer them and felt that by burying your head in the sand the problem would go away) may will mean they will look sympathetically on your case.

• If they have registered late payments against you, offering a payment plan to bring the account back into order may be considered sympathetically if you seem genuine about also servicing the account properly in future.
• If they have defaulted the credit agreement you should aim to get it reinstated (therefore removing the default). They are unlikely to remove the late payment indicators on your account however. Once they have reinstated the account you could try to get them to remove late payments, but trying to do both at the same time may be pushing your luck and mean that you fail on both counts.
• If they have registered a CCJ against you, you’ve probably got a harder battle in front of you. You will need to persuade them that having the case reheard will result in them receiving the money faster. If you can pay the whole amount then ask for them to apply for the case to be reheard, settling the amount quickly after the hearing will result in the CCJ being withdrawn. If you can’t settle immediately there are other options, but will require some skilful negotiation.

If you can’t rectify all of the ‘black marks’ on your file, then you can ask the credit reference agencies to put notes on your file – however lenders’ automated credit scoring systems don’t read these. The only time that they may be seen is when a declined application is appealed and an underwriter manually reviews your file. However in this case you’re better of giving the reasoning for your defaults etc personally to them – having notes on your account is often considered a bit ‘desperate’.

Other indicators can also be placed on your credit file, this would include CIFAS and GAIN indicators. Of course an IVA or Bankruptcy order on your file counts seriously against you.

Once you understand how you’re going to ‘tidy up’ your past financial situations you should then look at your current situation. You need to understand how lenders look at your file. What counts for you, and what counts against you?

Do you:

• Have associations (other family names) on your file that aren’t helping?
• Have lots of small loans and balances on credit cards?
• Have repeated applications for further credit?

Are you:

• Maintaining regular payments?
• On the electoral (voters register) role?
• Making lots of applications for credit?

Once everything is in order – your past and current credit and you wish to apply for further credit there are several things to bear in mind. You should apply for credit that you think you will get. If you’ve had defaults and late payments then applying for a £10,000 unsecured loan (even to consolidate your debts) is unlikely to be successful. You need to think about what your eventual goal is to achieve, maybe this is:

• Generally better credit as you’re in a stable financial situation now and will want to borrow in the future.
• Moving your debts to a different lender to achieve a better interest rate.
• Applying for a mortgage in the near future.

Remember to read the other individual articles on the left to make sure you understand the whole picture. There’s a lot to take in, but with a little effort and some time you should find yourself in a considerably better position.