How to Obtain Your Credit File and Repair Your Credit Problems by Peggy Cook

How To Obtain Your Credit File and Repair Credit Problems by Creditplus

Contents 1.0 Introduction

Page 5

2.0 How To Get Copies Of your Credit File

Page 6

2.1 Agency Addresses 2.2 Sample Letter

3.0 Understanding Your Credit File

Page 12

3.1 Negative Entries 3.2 Positive Entries

4.0 How to Improve Your Chances of Getting Credit

5.0 A Guide to Cleaning Up Your Credit History

Page 17

5.1 Sample Letter 5.2 Default Notices 5.3 How To Remove Searches 5.4 How To Remove CCJs 5.5 The Affidavit

6.0 Credit Scoring and Finance Applications

Page 16

Page 28

6.1 Top Reasons Why Your Credit Score Might Be Low

7.0 Frequently Asked Questions

Page 33

1.0 Introduction Whenever you try to obtain credit the company that are potentially going to lend you money will always check your credit file. What they find on your credit file will be the details that make up your credit rating and ultimately determine whether or not they will offer you the credit line that you are applying for. When you have a good credit file you will often have a wider choice of where you wish to obtain credit from. When you make an application you will be highly likely to be accepted without any issues. However, if you have a credit file that has a history of negative issues such as miss-payments, defaults, CCJs and other problems, it can be hard to know what to do next. Each month at Creditplus we have customers that struggle to obtain credit for a car. We know from our own customers experience that it can be distressing to find out that your credit file has issues, some of which you may not even be aware of. We have created this guide to aid anyone who is struggling to obtain credit to start the journey of repairing their credit file. All of the key information you need is included in this one report. There is no need to go off and use an independent company that will charge a small fortune while making false promises about how they will improve your credit file. Within this guide we will provide you with vital information such as: • • • • • • • •

Where to obtain copies of your credit file (including sample letters) How much your credit file will cost How to understand your credit file What counts as positive and negative points on your credit file What you can do to improve your credit profile How to clean your profile so it accurately represents your credit history How credit scoring works and which areas hold the most weight Many frequently asked question about credit ratings

Did you know…You can improve your credit rating Page 5

2.0 How to Get Copies Of Your Credit File It can be difficult to understand your credit file and to make sure everything within your file is correct. This can become even more difficult when you miss payments or other negative issues appear on the report. This guide has been created to ensure that you can quickly navigate your way through the potential minefield of credit, credit files and credit scores. The most important thing that you need to know is what is in your credit file and how you can improve it if needs be. To do this you need to obtain a copy of your file, which you are legally entitled to. These credit files are held by credit reference agencies, and the main agencies are called Equifax, Experian and CallCredit. The great news is that it only costs £2 to receive a copy of your report, and the money simply covers the cost of the paperwork and administration from each agency. These agencies will not give you this information over the phone, so you need to write a letter to receive a copy of your file. This document should quote your full forename and surname, your date of birth and (this is very important) full addresses for everywhere you have lived in the last six years (addresses must include your postcodes). If you have forgotten any of your addresses the Royal Mail website has a useful postcode finder tool which can help you which you can find on their website (www.royalmail.co.uk). Write the letter (the template example can be found on the next page) and include a postal order or a cheque for £2 (made payable to the company you’re writing to). Your credit file should arrive shortly after. Alternatively, you can apply and even view your file online if you like, which can save a lot of time. You need all the same information, however you simply need to visit the following web pages: http://www.equifax.co.uk/Products/credit/statutory-report.html# http://www.experian.co.uk/consumer/statutory-report.html https://www.callcredit.co.uk/stat-report-online/ If you are married, it is recommended that you send separate documents and you will need to pay separately as well. This is recommended because it may still be possible that one of you has bad / inaccurate information on their file, whereas the other may still have a good credit profile and be able to obtain credit at a good level!

Did you know…You can obtain a free copy of your credit rating Page 6

2.1 Here are the addresses of the respective agencies:

Experian Ltd, PO BOX 8000, Nottingham NG1 5GX

For convenience, you can also apply online at: www.experian.co.uk/consumer/orderPaperReport.html

Equifax PLC, Credit File Advice Centre, Box 1140, Bradford BD1 5US Their website can be found at: www.equifax.co.uk

Consumer Services Callcredit Limited PO Box 491 Leeds LS3 1WZ Callcredit’s website can be found at: www.callcredit.co.uk

Did you know…We have provided sample letters in this report Page 7

2.2 SAMPLE LETTER

YOUR NAME YOUR ADDRESS TOWN COUNTY POSTCODE Experian Ltd, PO BOX 8000, Nottingham NG1 5GX To whom it may concern, Under Section 158(1) of the Consumer Credit Act 1974, I am writing to request a statutory copy of my credit file. To cover these costs, please find enclosed a postal order for £2.00. My name is FORENAME (MIDDLE NAME) SURNAME and my date of birth is the 00th MONTH YEAR. My current address and all my addresses for the last six years are below: ADDRESS ONE, TOWN, POSTCODE – May 2011 to Present ADDRESS TWO, TOWN, POSTCODE – May 2010 to May 2012 ADDRESS THREE, TOWN, POSTCODE – May 2005 to May 2010 Yours Faithfully, YOUR NAME

Did you know…Whenever you apply for credit your file will be checked Page 8

Whenever you request credit, be it from a high-street shop, a loan company or credit card company, they will run a credit check with one or more credit agencies that hold your credit information. Please Note: Every UK resident over the age of 16 years will have a credit file. This credit file is completely legal and can not be opted out of. The credit file will hold information about your credit history. This information will then be used to determine whether credit will be offered and the rate of interest. Depending on the company you have applied to for credit and the information about your previous credit history, there may be times when your credit request is rejected. In this case, it is possible to ask the company to release information on which agency issued the credit information to them. In the UK, the agency that has been checked would generally either be Equifax, Experian or CallCredit. If you would like to know which Credit Agency has been contacted when you made an application for finance, the company that you approached to borrow money from legally has to tell you which agency they checked with. Below is a sample letter that you can use to contact a company to identify the credit agency which your records have been checked against: SAMPLE LETTER: Dear (COMPANY NAME) Under Section 157 of the Consumer Credit Act 1974, I am writing to request the name and address of any credit reference agency which has issued you information about me. I request that you reply within the next seven working days upon receipt of this letter. Yours Faithfully YOUR NAME

Did you knowâ&#x20AC;ŚYou can not opt out of having a credit file Page 9

Usually the main credit agencies will hold the same or very similar information as each other. They also regularly share their information to ensure that all credit agencies offer the best possible level of detail about the credit history of an individual. There is a possibility, however, that their files will not match, due to them holding different databases. Building societies, banks and other finance houses are also offered a similar service from the credit agencies to ensure they can make sensible decisions about their customers and who they offer credit to. All information held by these agencies, both good and bad, is deleted after a period of 6 years. Even if the relevant debt is cleared, CCJs are held for a six-year period, due to lenders being interested in a rounded credit history of the customer, and would want to know of any recent reasons why the borrower may have failed to pay back their debt. Typical details that may be held would include: • • • • • • • • • • • • •

Your name Your address How long you have been at your current address Your date of birth All known credit transactions Lender details Repayment details Your account’s current status Any other information related to previous borrowing Voter’s electoral information Known aliases Financial linked associates Recent credit searches

You are free to obtain this information. There should not be any additional information about you either so you should carefully check what is on your file.

Did you know…Each credit agency will hold slightly different information about you Page 10

An area that many consumers are unaware of when applying for credit is that a large number of searches (or inquiries) can have an adverse impact on your credit score. This is more likely when you have had a borrowing requested declined. As each time you make a borrowing request to a lender it is recorded, lenders that you apply to in the future will be able to see the information. They won’t be able to see the lender’s names, but will see the date and type of search. Another point to keep in mind is that having too many credit searches can affect the way that lenders view your credit profile. If you are simply shopping around for a quote to see if credit is affordable it is sensible only to apply to one or two lenders. Some people will get very anxious about credit searches, but they are normal and will not impact you too much as long as you are sensible with the amount that you have conducted on your file. If you are not serious about obtaining credit then it is best not to have a credit search conducted. However, you will always have a credit search on your file when you do apply so do not be afraid of this process. If you have been rejected three or four times we would recommend that you stop applying for credit and following some of the steps in this guide to obtain and repair any negative issues that may be on your file.

Did you know…The information on your credit file will be removed after six years Page 11

3.0 Understanding Your Credit File When you receive your credit profile you will see both the positive and negative entries that are listed. There may be terms on your file that you do not understand. The list of terms below explains each of these to make sure you have a clear understanding of different points on your credit file that could be affecting your credit rating. 3.1 Negative Entries Missed Payments When you miss a payment it will be recorded on your credit file. Often missing payments will harm your credit file and may mean that you will struggle to obtain credit at a later date. Even if you just miss the odd payment, when you do get accepted for a loan you may find that the rates are higher than expected, as you are now perceived as being a higher risk to the lender. Recent missed payments have much greater negative impact than historic ones. Current arrears have maximum negative effect. Defaults If you have missed multiple payments on a credit agreement it may result in a “default”. If you default on a credit agreement the company that lent you the money will send the record of the default to the various credit agencies and they will be placed on your credit file. The payment profile will then stop and only the balance is updated - This stays on your file for 6 years. County Court Judgements (CCJs) CCJ stands for County Court Judgements, this is the term used when you have been taken to court for failure to pay back money you owe. Unfortunately CCJs will negatively affect your credit file and you will struggle to borrow money from prime or near prime lenders. A CCJ will stay on your credit profile for 6 years and will seriously harm your ability to obtain credit. If you pay the money owed within one month of the of the court issue you will be able to have the CCJ removed from your file, but in order to do this, you will need a Certificate of Satisfaction. If you pay the amount AFTER one month, it will be shown on your file as settled (if the above certificate is issued) for six years. Even though it is settled, lenders will see any CCJs on your credit file as a negative entry and it can impact future credit requests.

Did you know…Negative points on your file will affect the rate you can borrow at Page 12

Bankruptcy If you become bankrupt you will struggle to obtain finance. Again, this information is held for 6 years by the credit agencies. There are ways to get this removed though. If your bankruptcy order is “annulled” or withdrawn, you can send a copy of the certificate you will have been issued to the credit agencies. If your bankruptcy order ends, you must send a copy of the discharge certificate, and the agencies will also update their files. C.I.F.A.S. This stands for Credit Industry Fraud Avoidance System, and any CIFAS entry on your file is bad. CIFAS registers different types of fraud, such as false names, stolen credit cards and false applications. When there is a CIFAS entry, it means lenders will take extra care to ensure that the application is genuine, though unfortunately sometimes the application will just be rejected, even if it is legitimate. One reason for this, for example, would be if your address has been used for fraudulent activity in the past. The credit referencing agency should be written to, requesting all the details of a CIFAS entry if this is the case. IVA IVA stands for Individual Voluntary Arrangement and is used by an individual to come to a deal with a lender to avoid declaring themselves bankrupt. An Iva is a legally binding contract, which stays on your file for six years. Essentially, they allow you to consolidate your debt into a single monthly payment. There are major benefits to an individual to enter an IVA as often they will be able to reduce their total amount of debt by up to 75%, leaving the individual to pay off the balance within 3 to 5 years. Lenders will not look at an IVA in a positive light, and individuals will struggle to obtain credit until this is removed from their credit file.

Did you know…Being on the electoral roll is vital to borrow money Page 13

3.2 Positive Entries Subscriber Supplied Information / Credit Account Information Usually when you have a line of credit the history of that credit will be detailed on your credit file. Each credit account that you have will be listed individually, although it is possible that not all of your accounts are listed. The credit will be represented by a row of 12 numbers. Each of the 12 numbers represents a month of the last rolling year. The number shown will represent whether or not you have made payments on time. They also show if payments are made late, how late they are and if you have defaulted (this will be represented with a D not a number). Below is an example...

002112232210 In the example above shows the account holder was 2 months behind, 3 months ago, and 2 months behind, 6 months ago, etc. A well looked-after account would generally be filled with only 0’s and the occasional 1 (if you were late one month). If you have all 0’s it means you’ve kept up with all of your payments for the last year. This is a very good signal for lenders as it shows that the person has the ability to manage their finances well. This makes them a lower risk when it comes to lending them money in the future. Here is a summary of what the codes mean: 0 – Payments are up to date 1 – In arrears by one payment 2 – In arrears by two payments 3 – In arrears by three payments 4 – In arrears by four payments 5 – In arrears by five payments 6 – In arrears by six payments D – Account defaulted. This often means the account has been closed or legal action has been taken and the lender has formally asked for all the funds back.

Did you know…You can challenge any incorrect information on your credit file Page 14

You will also be able to see a summary of the last 36 months, where the Defaults would generally be shown. Electoral Roll Information This is a very important factor and is usually understated by most consumers. Traceability is incredibly important to all lenders as it shows that you are happy to prove where you are living. The electoral roll is a list of all of the people who have registered at their current address and have the right to vote for elections. The electoral roll is generally prepared every February, so if you miss the date, it’s a good idea to contact your local authority and get your details added. This can then be added to your credit file. If you are not on the roll, it may prompt lenders to question why, and will cause problems with credit applications. Lenders like to see a consistent address history as it means if anything were to go wrong and you don’t pay back the credit, the lender would know your current address.

Did you know…You should inform your lender if you’re struggling with payments Page 15

4.0 How to Improve Your Chances of Getting Credit Please note the steps you can take to improve your ability to get good credit: Check your credit report - People that know exactly the state of their credit file will be at a massive advantage when applying for credit. If you are unsure of what is on your credit file make sure you get a copy of your file now. If nothing else it will ensure there is nothing on there that shouldn’t be and that needs to be challenged. Check if you are on the Electoral Roll - If you’re not, get on it. It will definitely help in the long run as lenders want to know where you have been living (also known as traceability). Get a Discharge Certificate – If you have been bankrupt in the past, but your bankruptcy has ended, make sure you inform the credit agencies. Send them the discharge certificate or annulment and ensure that they update your file. Get a Certificate of Satisfaction - It costs just £10 to get a Certificate of Satisfaction from a court. If you’ve paid a Judgement and it hasn’t updated to say “Settled” on your file, you should contact the court and request one immediately. Inform the Lenders if you are in trouble - If you are struggling to make payments on time make sure that you inform the relevant lender or credit provider. These companies will look favourably on people who communicate with them when they are struggling. Some lenders or credit providers may even be able to offer options to help you manage your debt. Do not just ignore that fact that you are struggling as it will make things harder for you in the future. If you can make the payments, do! It goes without saying that making payments on time is the most beneficial thing you can do. Challenge Incorrect Files - If all your payments have already been made and you have always been up to date, but your file does not reflect this, contact the companies involved and they can make arrangements to change your file to reflect this.

Did you know…Every time you apply for credit a search will be recorded on your file Page 16

5.0 A Guide to Cleaning Up Your Credit History The next section will help you to make sure you can clean up your credit file so you have the best possible chance of obtaining credit in the future. Below are some important points that you should follow in order to make sure that your credit history is accurate and as positive as possible. After 6 years it is normally your legal right to have information removed from your credit file. This is not always done automatically for you so make sure you write to the credit agencies and request that it is completed. If you feel that an entry on your report needs explaining in more detail, you can file a Notice of Correction. This should be no more than 200 words, and must be correct and relevant to the entry you are writing to correct. Some good reasons to change an entry would be losing a job or suffering from a long-term sickness. However, some lenders will still reject applications with a correction stated. 5.1 SAMPLE LETTER Dear (Agency) REFERENCE NUMBER Thank you for sending me my report dated 00.00.00, Please add the following correction to my file. NOTICE OF CORRECTION I, YOUR NAME of YOUR ADDRESS would like it to be known that the judgement recorded against me for £XXX refers to a payment I was unable to make due to being made redundant in 2010. I gained employment again in 2011 and paid the bill in question. Please amend my file for anybody searching it to take these facts into account. Faithfully, YOUR NAME

Did you know…No one can guarantee that a CCJ will be removed from your file Page 17

Please note: you will need to fill in the details that are relevant to your personal situation. The new information that you provide will need to be updated on your file. An update will also be sent to any lender who has requested your information in the past 6 months. If the notice of correction relates to a county court judgement or sheriff court decree, the agency will pass it to Registry Trust Limited, who will pass it to the credit reference agency. If the notice refers to information other than a judgement or decree, you should check if the agency has the same information, and if so, send it the notice of correction. The agency has 28 days to reply to your letter. If it doesn’t, you can ask the Data Protection Commissioner to intervene. There is a possibility that an agency might decline to add the notice to your file. In this case, it must refer the matter to the Data Protection Commissioner for a decision. Sometimes your file may be mixed up with someone with the same name living at the same address as you. If you believe this is the case then you can request a notice of disassociation from the credit reference agency. You will be sent a form which you will have to sign and return. Once this has been received by the agency the record will then be deleted from your file. If the agency refuses to make a valid change you can go to the Data Protection Commissioner to look into the case. 5.2 Default Notices You should check your file for any notices of Defaults. If you have any then you should use the information provided below with the sample letter below to write to the finance companies that have issued the defaults against you, at this point you should try to settle the default. A default is a record sent to the credit reference agencies from banks, building societies or other financial institutions, detailing things such as missed payments on

Did you know…An ‘Affidavit’ is vital if you want a CCJ ‘set aside’ Page 18

a credit agreement. They are not in the public domain (unlike County Court Judgements); they are only held in the credit agency records and are designed to alert other finance companies that you have defaulted on a previously agreed credit agreement. As such, they are viewed as important information for lenders who will use the information to make future decisions. The only way to remove a default is by contacting the organisation who served the notice of the default in the first place. Looking through your file, you will be able to tell who placed the notice. Once you have this information you can set about contacting them and coming to an agreement. They may be able to remove the notice in any of these situations: • The default notice was served but the payments were then brought up to date. • The loan has now been fully repaid. • The payments are still in default but an arrangement has been made with the company in question. • You think the notice has been placed on your file incorrectly. SAMPLE LETTER: Dear Sir/Madam I am writing regarding a record which has been placed on my file concerning a debt that I owed to you. If this debt has now been repaid or settled, please write and confirm this so that I am able to clear my name with the credit reference agency. If the debt has not been settled, please write with the details of what you would require to settle the outstanding debt. The loan was taken out on the DATE HERE and my account number is NUMBER HERE. Yours faithfully, YOUR NAME

Did you know…Each lender will have their own lending criteria Page 19

Provide the finance company with as much information as you can. The more you provide them with the easier it will be for them to help you. For example, if you took out the loan at an old address, include those details, along with the details of your new address. If the finance company mention that you are still in debt with them, and gave a repayment date, it is worth writing back to them stating that you will only do this if they are prepared to write a letter asking that the default notice is removed from your report. Many large organisations are not good at keeping paper work and this can sometimes be an advantage you. Write to the lender to request a copy of the original signed agreement for the debt. If they can’t do this you have the right to request that they remove the default from your report, due to them having no signed agreement regarding the debt. 5.3 How to Remove Searches Whenever you apply for finance or credit the lender will search your credit file to ascertain the level of risk associated to you. This search will be recorded on your credit file. Too many searches may make you look ‘credit hungry’ and this will adversely affect your credit file. If you have had searches conducted that you did not authorise you will want to have these searches removed to ensure it does not damage your file. To remove these searches you will need to write to the people who requested the searches originally, and ask them to provide written proof that you authorised the search. If they can not provide this proof, can ask them to remove the search in question. 5.4 How to Remove CCJs The first thing that you need to be careful of when looking to get a CCJ removed is any company that promises they can have CCJs removed from your file. No company can guarantee this, and most will only undertake the same instructions that we have listed below for you.

Did you know…Having a bank account will help you when applying for credit Page 20

Write to the court to request all information they hold against you in regards to any judgements which have been made. To remove judgements, you must use an N244 form. An example is included below. It’s worth noting that some courts require that you use original forms, which are available free of charge from the courts. Many people do not realise that a surprising amount of CCJs are the result of an undefended summons. These cases usually arise because the defendant does nothing, as they do not know what response to give. The court then enters a “Judgement by Default”, which is passed through The Central Registry to the credit agencies. Even if the debt is paid off, the judgement would stay on the record if nobody has asked for it to be “set aside”. If you dispute the debt, have paid the judgement or if you believe the CCJ wasn’t properly obtained, it is possible to repair or even remove the entry from your file. Otherwise you will have to pay to repair it. As an example, the courts would look favourably on the defendant having been making payments regularly for a year or so. Below we have listed other reasons to get judgements put aside. If you use these reasons keep them as clear and concise as possible: • Were you given 28 days notice in order to pay the bills/debts? • Were you living at the address when the summons and judgements took place? • If you took out a loan for any form of credit were you in receipt of the Default Notice before receiving the summons? • Did you receive the summons? (They are not sent by recorded mail) • Maybe you were unable to attend court and defend yourself. • The judgement should not appear on the credit files if it was paid within 28 days. • If you agreed to settle “out of court” you should not have received a judgement. • If you did not receive any notification of the judgement(s) made against you, you can appeal. • Did you agree with the full amount of the judgement at the time, but now only

Did you know…Steady address history will help you when applying for credit Page 21

agree with part of it? • Was the summons taken out against both yourself and another person jointly? If so, did you both receive your summons? • It could have been that you were away from the time between the issue of the summons and entry of the judgement. • Did you receive the summons on time for you to apply to the court? You have 21 days to reply to the court. If the summons was 21 days late then the judgement would have already been taken out against you. Before doing this, you will need a few things: 1. The original summons 2. The name of the plaintiff (who took out the summons) 3. The name of the court 4. The Case Number That last point is very important. Without the Case Number, courts will not even read an application. If you don’t have it for any reason, you can write to the central registry and ask for the details. This will cost £15.00. The address you need to write to is listed below:

Registry of Court Judgements Registry Trust Ltd 173/174, Cleveland Street London WP1 5PE Did you know…Even with a CCJ or default you may still get a loan Page 22

Below is an example of the N244 Notice of Application form. As previously mentioned, some courts require original forms to be completed, which you can request from the courts. SAMPLE FORM

Plaintiff / Defendant’s Address YOUR NAME YOUR ADDRESS YOUR TOWN YOUR COUNTY YOUR POST CODE State nature and grounds of application to be set aside… I wish to apply for… The reason being that (I did not receive the summons/wasn’t given enough time, etc…) Signed: …………………………………. Sign Here: ……………………………… Dated: ….. ../ ……./20…… Address for service Your Address: ………………………………………………………… …………………………………………………………

Did you know…Being a home owner will help your credit rating Page 23

5.5 The Affidavit This next part, “The Affidavit” is essential if you are to make the court believe that the request is genuine. Without one, you are likely to be declined in your request unless you have a very sympathetic court. Type or hand-write (with black pen in block-capitals) the defendant (you) and court details onto the form N244 as you see above. Enter the reasons to “set aside” the judgement. The main aim here is for it to make sense. No legal jargon is necessary, other than after “I wish to apply for…” you follow it with “Judgement to be set aside on the following grounds.” It is here that you list your reasons. Take both the Affidavit and N244 form to a solicitor’s office, and ask to see a solicitor for “a Statutory Declaration”. In front of the solicitor you will swear to the truth of the statement on the “Notice of Appeal”. You will “Make an Oath” that the statement is true. You will then need to sign it in front of the solicitor. They will then sign and rubber stamp it. You will be charged the standard £5 fee, which has the advantage of showing the court you are willing to go to the effort to clear your record. On the Affidavit, only fill in your details and the court details. The bottom section is for the solicitor you visit to fill in. The Affidavit, when “Notarised” by a solicitor and combined with the form N244 they become an official legal document, accepted as genuine and truthful by the courts. Without these, the request wouldn’t be so much as looked at, let alone processed. Once both documents have been signed, staple them together and send them first class to the court concerned. Make sure it is addressed to “The Chief Clerk”.

Did you know…Affordability is important when applying for a loan Page 24

Once the court has received your request, they may ask you to be present for the hearing. If you can’t make it, write to the court to tell them you cannot be there, and that you will be happy to abide by whatever decision the court makes without you there. It is highly likely the court will look upon this favourably, as it both saves them some time and shows sincerity from yourself. Whenever you are writing to the court, remember to add the Case Number. After a few days you should receive notice from the court of your “set aside.” On the following page you will find a sample of how the Affidavit should look.

Did you know…If one lender rejects your application another may still accept it Page 25

SAMPLE FORM: AFFIDAVIT No 1 Sworn on ………… 20 …….. Filed on behalf of the Defendant. In the …………………. County Court

Case No. ………………….

BETWEEN …………………………………………

PLAINTIFF

DEFENDANT

AND ………………………………………… I (Name) Of (Address) MAKE OATH and say as follows: I AM the Defendant herein THE written contents of Notice of Application Form N244 annexed hereto are true. I THEREFORE ask this Honourable Court to grant my request for judgement in the above case to be set aside. SWORN at This day of …………….. 20 ……… Before me, a solicitor empowered to administer oaths.

Did you know… Too many credit applications will reduce your credit rating Page 26

Once you have had it confirmed that the judgement has been “Set Aside”, you can write to the credit reference agencies requesting removal of the CCJs from your file. The following letter can be used for removing both CCJs and Default Notices. If you only need one or the other to be removed then delete as appropriate. Give them as much information as possible. The credit reference agencies are legally obligated to update your file as soon as possible. SAMPLE LETTER Experian Ltd, PO BOX 8000, Nottingham NG1 5GX Date: ……………………. Dear Sir / Madam I have enclosed confirmation from the county court that the enclosed judgement has been set aside. Please remove this judgement from my file immediately. I also enclose a letter from FINANCE COMPANY NAME stating that the loan from them has now been repaid in full and that they are prepared to have the default in my file removed. Please also remove this immediately. Once you have carried out the above, please write and confirm this as soon as possible. I look forward to hearing your reply. Best regards, YOUR NAME

By analysing your credit file a lender will usually rate or score your file according to

Did you know… You can improve your credit rating Page 27

6.0 Credit Scoring and Finance Applications their lending criteria. A lender will then use the information found in your credit file to determine whether or not you are the type of customer they want to lend money to. It will also determine the likely interest rates that you will be offered by working out if the associated risk involved is high or low. The higher the score, the lower your risk you pose to a lender. Here are some useful points that could influence the lending decision: 1. The Lenders have their Own Criteria - Though all lenders refer to the credit referencing agencies (usually Experian or Equifax), it is always the lender’s decision whether or not you get accepted for credit. All lenders have their own rules, and their own standards as to what credit score is acceptable. 2. You Credit History is Vital - Your past credit history is an important part of your credit record. If your payments are up to date, and none have been missed, your score will be higher. 3. It is Vital to be on the Electoral Roll / Voters Role - Any application is likely to be hampered if you are not on the electoral roll. As mentioned earlier in this guide, the roll is updated towards the end of the year and published in February, so get on it as soon as you can. 4. Length of Current Employment – The longer you have worked for your employer the better it will look on your credit file. This shows stability in your earning and also shows that you are unlikely to suddenly not be able to pay back any loans. 5. Length of Address History - Your credit score will be higher if you have lived at your current address for 3 years or longer. It will also be a benefit if you have a mortgage or if you own your own property. 6. Bank Accounts – The longer you have banked with the same bank the more beneficial it will be to you. Also if you have managed any overdrafts well you are more likely to obtain a good loan rate. 7. Number of Searches - As previously mentioned in more detail, each and every search on your file is recorded. If you have applied for many cases of finance, it could make a negative impact on your credit score. 8. Not All Lenders are the Same - Even though your information stays the same, each lender will have their own criteria. Therefore, your application may be refused by one lender, but accepted by another.

Did you know… You can obtain a free copy of your credit rating Page 28

9. You May Still get a Loan with CCJs - Not everybody will reject you if you have CCJs in the past year. However, it will lower your score and limit your ability to get good rates. Check Your Credit Score. It is likely that whenever you apply for credit you will be faced with a similar set of questions. These questions will have a certain score attached to them, and generally the weighting of these questions will vary slightly from lender-to-lender. The most common questions include details of your personal information, home address, job and address, salary, number of dependants, etc… It is possible that some lenders will ask questions others won’t deem important. Therefore it is possible that if you are turned down by one company that another will accept you. You also shouldn’t assume that multiple lenders have all rejected you for the same reasons. 6.1 The Top Reasons Why Your Credit Score is Low Please Note: Depending on the lender the importance of each of these points will be weighted differently. You have a bad history of paying back credit Your history of paying back borrowed credit can account for 35 – 75% of your credit score. Don’t be fooled into thinking it is only larger problems such as CCJs or defaults that will have a negative impact. Anything from missed payments, going over your agreed overdraft, too many credit searches, or even the lack of monthly affordability can have a negative impact. Whilst negative entries will stay on your file for 6 years, the impact of missed and late payments diminishes over time. If your payments have been on time over the last 48 months, the late, older payments will have no impact on your score. You are not on the Electoral Roll If you are not on the electoral roll at the address on the application there is a high probability you will be rejected. You have lived at your current address for less than 3 years

Did you know… We have provided sample letters in this report Page 29

If you are a tenant and move house frequently, it will start to impact your credit score. This is because lenders like to see stability in your life if they are going to trust you with their money. Even if you have only moved a couple of times in the last few years your credit rating will start to drop. If you are a home owner the impact will be lower. If you have been at your current address for less than 6 months, your score will be affected. New Job Employment is another area that lenders like to see stability. If you have been in a stable job for many years, you will be looked at far more favourably than someone who changes their job every few months. Ideally, if you are changing jobs, you should hold off on applying for credit for a few months. Also, if you’re in a probationary period, this can also result in a decline. This is not such an issue if your salary is increasing. Any reasons you have for changing jobs should be noted and included in the application (such as freelance employment, transfer within same company or promotions). Having a job for a number of years, though, is what will give you the better score. There is a chance the lender will ask to see the last couple of months of pay slips as part of the application, so keep these somewhere handy. It goes without saying that bouts of unemployment can adversely affect your credit score. If your profession requires you to move around and change jobs regularly (freelancers, artists, photographers, supply teachers, etc) it is worth writing this down and including it in the application. Income / Affordability Whenever you make a finance application you will be asked for your salary or monthly net wage. Lenders need to know how much income you have each month as they will calculate whether they think you are able to afford the re-payments. As a rough rule of thumb, as long as your loan repayments are under a quarter of your monthly net wage, the lenders will be satisfied you can afford the loan. However, this will depend on any other fixed costs you have such as other loans and mortgages. Lenders will also want to ensure the source you get the income from is steady and the amount you earn is consistent. No Bank Account / New Bank Account

Did you know… Whenever you apply for credit your file will be checked Page 30

As mentioned previously in this guide, it is very important to have a bank account. Ideally you will have held this bank account for a number of years. This will get you the best credit score, having a new account will lower your score. Not having an account at all will be very detrimental to your application, so it is recommended you open an account as soon as possible. Too Many Credit Applications Making an application every few months shouldn’t impact your credit score too badly, but, anything more will begin to reduce your score. If you have made a number of refused applications, try not to make any new ones for six months. This gives space before applying again and room for you to review your credit file and find ways to improve it. Remember - EVERY application and search on your file is recorded if it’s run by a lender. Some brokers (including Creditplus) run a “soft” search, which other lenders will not see. Filling In The Application Form When you apply for finance it is vital that you complete each of the sections accurately with honest information. There is no point trying to amend any of the information as lenders will run many different checks and you will be caught out. Sometime it might even be worth adding some additional information if you think it’s relevant. This may help to make sure your application is dealt with efficiently. Also bear in mind that it is possible for perfectly responsible applicants to be rejected, simply because they don’t fit the lender’s profile of their “ideal” borrower. Clearly Complete Your Application If you can, make sure you type up your application as it will generally be clearer to read and will be more presentable than a hand-written document. If you cannot type it, make sure your hand-writing is clean, presentable and always use block capitals.

Owning Your Own Home

Did you know… You can not opt out of having a credit file Page 31

If you own your own home, or are paying a mortgage to own your own home, lenders will look upon you favourably. This is because is shows that you are responsible with money and that you are financially committed to an area. Therefore you are unlikely to move away suddenly to avoid paying back any debt. Dependents If you are responsible for feeding, housing and clothing any dependents it might affect your score. Usually though, the score isn’t adversely affected until you have 3 or more dependents, as it would indicate your budget could already be under strain. Surprisingly to some people, those who have no dependents achieve a lower score than those with 1-3 dependents. This is due to the assumption that they could easily uproot their lives and move on if their debts become too much.

Did you know… Each credit agency will hold slightly different information about you Page 32

7.0 Frequently Asked Questions Q: Why was I turned down for credit? A: The lender you applied to made this decision, and only they can tell you why. They may have turned you down because of information on your credit report or because of the information they have (such as the information you provided on your application form). They are legally bound to tell you why they refused you credit and they should tell you if their decision resulted from information held on your credit report, as a result of credit scoring, or because of their policies on providing credit. Q: If one lender has turned me down for credit will others do the same? A: Not necessarily. Different lenders take different things into account when deciding whether to give you credit. One lender may refuse your application while another may accept it. If a lender turns down your application, get a clear explanation from them why they made their decision. Do not continue to try and get credit at this stage, it is always best to understand why you may have been turned down before contacting other lenders. Every time you try to get credit will be recorded in your credit file. Making several unsuccessful applications for credit over a short period of time can have a negative effect on your file. Follow the steps in this manual to obtain your file and start the process of cleaning up your credit history. Q: Does making several applications for credit reduce my chances of getting credit in the future? A: Making several applications for credit over a short period of time can influence a lenders decision. If you are hopping around for the best deal, you should ask for a ‘quotation’ rather than applying for credit. Asking for a quotation should not affect your chances of getting credit in the future because, for most types of credit, lenders do not have to search your credit report to give you a quotation. Q: What is credit scoring? A: The information on your credit report, and the information you provide on an ap-

Did you know… The information on your credit file will be removed after six years Page 33

plication form to a lender, may be used by that lender to give you a credit score. The lender will use this credit score to identify the risk of offering you credit Q: Can I find out my credit score? A: Yes, however different organisations have different methods of calculating credit scores. They do not have to tell you exactly how they work out their credit scores, but they should give you a basic explanation of how their credit scoring works. They should also tell you whether your application has been refused because your credit score was too low, or because of the information held on your credit report. Q: What do credit reference agencies do? A: Credit reference agencies have huge databases on the credit histories of consumers known as C.A.I.S data. This information is gathered and given to the credit reference agencies from shops, businesses, banks, etc, which have given you credit in the past. Your credit history contains information that potential lenders use to evaluate and determine your ability and willingness to repay credit. Typically, credit reference agencies give the following information: Your open accounts, credit limits, amount owing on loans, number of late payments, collection actions, and whether you own your own home or not. There is also a C.I.F.A.S database which detects fraudulent activity. Q: How does a lender qualify me for credit? A: Most lenders look at the number of years you have worked at your present job, the kind of work you do, the number and nature of negative entries in your credit report, the amount of credit you currently have, savings and or current accounts with the lender, length of time at your present address, is the telephone in your own name, do you own your own home and other factors. They are looking for stability, especially in residence and employment, and of course, sufficient income to take on more debt.

Did you knowâ&#x20AC;Ś Negative points on your file will affect the rate you can borrow at Page 34

To recap, the key elements for many underwriting decisions are based on: tractability, affordability, credit worthiness and your attitude to pay back debt. Q: What do I do if I’m turned down for credit? A: Firstly, you need to understand why you have been rejected for credit. The lender must provide you with the specific reasons why you were rejected, and the name and address of the credit bureau that provided your credit report. You can appeal your rejection by sending a letter to the lender explaining why you are a better credit risk than your credit report indicates. But, it is best to rebuild your credit before applying for credit again. Q: Who can look at my credit file? A: Anyone with what is considered a permissible purpose can look at your report. These companies, groups, and individuals include: • • • • • • •

Potential Lenders Landlords (although they may only be able to view certain portions) Insurance Companies Employers and potential employers (usually only with your written consent) Companies you allow to monitor your account for signs of identity theft Any government agency (although they may only be able to view certain portions) Someone who uses your credit report to provide a product or service you have requested • Someone that has your written authorisation to obtain your credit report Q: Can I prevent credit reference agencies from holding information about me? A: No, they have a legal right to hold information about people. Credit reference agencies (Experian, Equifax and Callcredit) help lenders process credit applications. If they did not hold such information it would be much harder for you to get credit. A good credit record makes it easier for you to get credit.

Did you know… Being on the electoral roll is vital to borrow money Page 35

Q: How long does information stay on my credit file? A: All negative information stays on your credit file for anywhere from 1-6 years. Q: What’s the worst thing that can appear on my credit report? A: There are basically eight things that negatively impact your credit file. It is hard to order the worst points as different lenders assess the information differently. Some common examples are: CCJ’s, bankruptcies, repossession orders, defaults (paid/ unpaid), late payments, multiple searches, not being on the electoral roll. Q: I have bad credit. Do I have to wait 7 to 10 years before I can get a loan? A: It is possible for you to have a good credit file within 2 years of incurring problems with your credit file. Why? Because lenders are much more interested in your present circumstances than what happened to you 3 to 6 years ago. Rebuilding your credit can be done rather quickly through a systematic plan and a little perseverance. The credit reference agencies only hold information for six years, whether positive or negative. If you follow all our advice and you can quickly rebuild your creditworthiness. Q: I have my credit report. What do I do now? A: Go through it and look for negative items, such as: late payment history, multiple searches, and public records (bankruptcies, county court judgments). If any of these are inaccurate, dispute them directly with the credit bureau. This was covered in more detail previously in the report. Q: I found errors on my credit report. What do I do now? A: All incorrect or unfair credit information has to be eliminated from your file. All consumers have the right to challenge the accuracy of their credit report. Once you challenge the accuracy of a particular item, the credit bureau must investigate that item as soon as possible. If the credit bureau finds the item to be incorrect, or cannot confirm or deny it, it must be removed immediately from your credit file.

Did you know…You can challenge any incorrect information on your credit file Page 36

Q: How do I correct negative information on my credit report? A: Challenging the accuracy or completeness of an item is the best way to have a negative item removed. It is best if you can include documentation that supports your challenge. If negative information is outdated, you again need to bring this to the attention of the credit bureau. This should be done in writing. If the credit bureau fails to verify the items you challenged within a reasonable time (about a month) from the date your challenge was received then you should seek legal advice. Q: Should I use a credit repair agency to fix my credit? A: No. They often use illegal methods that can make things worse for you. Be wary of agencies that tell you that they can remove County Court Judgments (CCJs) and who require a large fee up front. It is better that you handle your credit problems yourself, because only you can do a good job of repairing your credit.

Did you know…You should inform your lender if you’re struggling with payments Page 37