Having a poor credit history can have a significant impact on your finances. For example, if you’re trying to get a bank account, the bank may turn your application down if you have a bad credit rating – as you may be seen as a ‘risk’ if you’ve had financial problems in the past.
There are many things that could have a negative impact on your credit rating, such as making late repayments towards your debts, entering certain debt solutions (such as an IVA – Individual Voluntary Arrangement) and/or having a high level of debt.
Let’s look at some of the possible consequences of having a bad credit rating, and what you could do to improve it.
Getting a bank account
As we mentioned earlier, when applying for a bank account, some banks and building societies could turn you down if you have a less-than-ideal credit history. However, if you can’t get a normal current account, you may be able to take advantage of bad credit banking instead.
Bad credit bank accounts are designed to help people who may have had financial problems in the past and are unable to get a ‘standard’ current account as a result. Accounts for bad credit tend not to require a credit check – so your application could be approved whatever your credit rating – and some offer built-in services to help you budget and manage your money, which could help reduce the likelihood of you facing further financial problems in the future.
It’s important to take some time to research bad credit bank account information and find out what the benefits could be.
Taking out further credit
The effects of bad credit can also affect the likelihood of you being able to borrow money again further down the line, if you wanted to. If you’ve been insolvent in the past – for example, with an IVA (Individual Voluntary Arrangement) or bankruptcy – it’ll show up on your credit record for six years, which may affect your ability to take out credit during this time. You may also be charged a higher interest rate on any credit you do successfully get.
However, there are steps you could take to improve your credit rating – such as making sure you’re registered on the Electoral Roll, or opening a bank account (see above), which could actually help to improve your credit rating.
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