How Does Debt Affect Your Credit File?
If you miss payments to your creditors, this could affect your credit rating. If your credit rating suffers, this will make it difficult to get credit in the future.
Your credit file will show you detailed information about any credit you have taken out, in addition to how you’re managing your repayments. In this guide, we’ll discuss how debt can affect your credit file.
What is a credit file?
A credit file contains detailed information that is shared by lenders, as well as other public information. One purpose of a credit file is to allow companies to carry out an ID check – this is to ensure you are who you say you are. For example, a company that is looking to employ you may carry out a credit check as another form of identification.
Credit files are mainly used by lenders such as banks, utility companies and retailers to help them decide whether they should lend you money (credit). Their decision will be based on your previous history. Examples could include paying your credit card(s), mobile phone contract or energy bills on time.
If the information held about you on your credit file is seen as a higher risk by a lender, you may be refused credit altogether, offered a lower credit limit, or be charged a higher interest rate.
What is a credit reference agency?
A credit reference agency will hold information about you that creditors will request when deciding on approving an application for credit.
Some credit reference agencies will provide you with a 30-day free trial, this will give you access to your credit score. You can find out more at https://www.gov.uk/government/news/online-credit-reports
What information is held on a credit file?
The following details will be held on your credit file:
• Full name
• Date of birth
• Current and previous address history
There will also be additional information stored on your credit file that is provided by lenders about any loans, credit cards, bank accounts, as well as other credit agreements you may have taken out. The following details are included:
• How much your outstanding balance amounts to
• If the account has ever been in default
• Credit limits for any credit cards and/or overdrafts
• Payment history, this will include any details on late or missed payments
• Details about payment reductions towards any type of debt management plan (DMP)
• Some utility companies may include information about payments made to them
A credit file will also include the following public information:
• If you’re registered on the electoral roll
• Details about any county court judgements (CCJs)
• Details about bankruptcy / insolvency
• Information regarding criminal fines or liability orders pertaining to child maintenance/support arrears
It’s important to note that not all creditors will share details with all credit reference agencies. This means that any held data may differ between them.
How long will the information be recorded on your credit file for?
Your credit file will include details of late payments, defaults and county court judgements for up to six years. You can expect these to be removed from a credit file after a six-year period, even if the debt is still outstanding.
As an example, if you missed a repayment to a creditor in 2015, this record would be removed from the credit file in 2021, regardless of if you’re still paying it.
Any information regarding a debt will be removed from a credit file after six years if any of the following apply:
• The account was in default
• You’ve been declared bankrupt, or an application for an individual voluntary arrangement (IVA), debt relief order (DRO) or trust deed has been approved.
• You have either reached a settlement with the creditor or paid the amount owed in full.
• A partial settlement agreement has been reached with the creditor to accept a reduced amount, the remaining balance will be written off.
If you have defaulted on any debts, they will be removed from your credit file completely after a six-year period, regardless of if you’re still paying it off.
However, there are some exceptions to note whereby a debt may appear on a credit file for longer than six years, although these are uncommon. As an example, bankruptcy can stay on your credit file for up to 15 years if a person has been found to have been dishonest or negligent with their finances.
If you’re concerned about debt and your credit file, speak to a specialist money advisor today by calling 0800 121 48 63, alternatively you can request a call-back by completing the form on this page.
Can my credit history affect other people?
Your credit history will only affect you, this means that other household members will not be affected just because they live at the same address.
However, if you have applied for credit in joint names with another person e.g. your partner. Your credit file will display this as an association to them as well. Poor credit history can affect both parties. The above may be applicable for joint bank accounts and/or loans, and if another person has agreed to be a guarantor.
If there is a joint bank account included within your credit file, and you’re no longer connected to that person, you can make a request for your credit file to be ‘disassociated’. This will remove the link shared between both associated credit files. You may only be able to request the above if the joint account doesn’t have anything outstanding, and you no longer live with that person.
You must contact a credit reference agency to apply for ‘disassociation’.
What if I’m added to a blacklist?
A creditor will decide to lend you credit based on information they have available to them found on your credit file. This means that each individual creditor will have their own criteria when making this decision. Their internal guidelines will determine how much you’re able to borrow, as well as the interest rate amount.
Considering the above, there isn’t a ‘blacklist’ that creditors refer to. Each lender will follow their own guidelines to determine any outcome.
Credit file frequently asked questions
What if the details on my credit file are incorrect?
If any details on your credit report are wrong, you need to contact the credit reference agency and lender to inform them as soon as possible. You may be requested to supply the necessary evidence to support this claim, this will allow them to update their records. If you’re finding it difficult to complete this, you should speak to their complaints department.
Can a poor credit history affect my job?
If you’re working in the financial sector, some employers may conduct a credit check for all new or existing members of staff. If you’re unsure and concerned about how your credit history may affect your employment, it’s a good idea to speak confidentially with someone from the HR department. Alternatively, you can also get further advice from your union representative.
Can I still get a mortgage if I have a poor credit history?
As explained previously, mortgage lenders will also carry out their own detailed credit checks. Because you’re likely to be borrowing a much larger sum of money when applying for a mortgage, you may find It difficult. Some lenders will include a higher interest rate or refuse you altogether due to the higher level of risk.
Can I rent a property with a bad credit rating?
Most landlords and letting agents will carry out a credit check before allowing you to rent a property. You will have to give them authorisation to access your credit file, this is common practice. If you have a poor credit rating, they may not offer you a tenancy agreement. Alternatively, they may request a larger deposit or guarantor to be added to the contract.
Some landlords may only check publicly available information from the public registers of court judgements or insolvency. This means that any history of defaulted payments to your creditors may not affect your tenancy contract. If you’re unsure, it’s better to disclose this information with the letting agency/landlord beforehand, this will help you avoid any problems later on.
Does my credit rating affect my car insurance?
Similar to most creditors, insurance companies will also carry out a credit check. If you’re paying through monthly instalments, a poor credit rating may require you to pay a higher interest rate. In most cases, a bad credit rating will not stop you from buying a car insurance policy.
Credit rating debt advice
If you’re finding it difficult to manage your debts and want to improve your credit rating, a wider financial solution may be the right option for you. To find out more, call Refresh Debt Services today on 0800 121 48 63 or complete the online form on this page to request a call-back.
Our friendly money advisors provide impartial advice and guidance. We’re able to discuss a range of wider financial solutions to suit your needs. Ultimately, helping you make the right decision when taking the first steps towards a debt free future.