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Kite Loans Blog

Why am I finding it difficult to get a loan?

Posted 18th December, 2019

So why are you finding it difficult to get a loan? The simple fact is that your credit footprint is giving potential lenders a bad idea about your history. This is commonly referred to as your credit report. We'll detail exactly what information your credit report has below and go through what each one means and the things you can do to improve it.

What does a credit report show?

A credit report will show numerous pieces of data from your credit history. This gives potential lenders a detailed breakdown of how reliable you are with your previous borrowing.

In general your credit report will show:

  • A list of your credit accounts.
  • Details of the amount outstanding on your credit accounts and if they are up to date.
  • A history of payments towards your credit accounts including any payment arrears that you are currently in.
  • A history of previously closed accounts.
  • Any defaulted accounts along with payment history associated to them.
  • Any CCJ's (County Court Judgements) you have against you.

Where can you check your credit score and report?

There are number of sites out there that will give you a breakdown of your credit score which also include a detailed credit report. All you will require is proof that the account belongs to you. You'll need to give your personal details including your bank account so they can be checked against their records. You may also be checked against electoral roll information for proof of your address.

Following on, very specific information will be asked and subsequently checked against accounts in order to pass their security checks. Credit report websites will often ask for information on individual payments based on a recent statement which can then be used to check the authenticity of your report request.

Here are some sites you'll want to look at:

Defaults - What are they?

A default is a mark on your credit file for a particular account. It means the person has not met the legal requirements to in order to keep up with payments. Obviously, a company isn't going to put a default on your account as soon as you miss a payment. However, as soon as you do, you'll start to go into arrears. Reaching 6 months of arrears means that the lender can put a default against you which will then show on your credit file.

Sometimes lenders will put you on a payment arrangement which sometimes may not result in a default on your account. Once an account is in default, it will remain on your credit file for 6 years.

If you're looking at further lending, getting a mortgage or are simply re-mortgaging, this could hinder your chances of either getting accepted or will mean you can have much less chance of getting the best deals out there.

It is worth noting that a default will affect your score more heavily at first but over time as the default gets further into the past, the score will improve. That's not to suggest that having a default isn't so bad, some lenders will flat out refuse a loan if you have any defaults.

How can you avoid a default?

The answer is really simple: Keep up with the payments and you'll not have to worry. If you fall behind, try and make up the arrears balance as soon as it's possible to do so. Arrears balances still show on your credit file but are not as damaging as a default. They may restrict you getting the best deals for loans or mortgages but as long as you show you are able to make up arrears, you don't have to worry too much. Some lenders are more fussy than others but overall it shouldn't be too much of a problem.

What can you do if you have a default?

If a person finds themselves in the unfortunate position of a default being marked on their account, then you do have some options.

If you were placed on a payment arrangement prior to the default, you can ask to have your default date changed to the date that the original arrangement started. This will mean that the default notice will drop off your credit file quicker. Not many people know this and it is an important fact which could help you remove defaults off of your credit file quicker.

CCJs - What are they?

A CCJ is a County Court Judgement against you. This means your previous lender has submitted a court claim for failing to pay back a loan. It is the worst thing to have on your credit file and will seriously damage you from having a chance of being offered any loans. Why? Because you are considered high risk. The chances are that if a lender gives you a loan you won't be able to pay it back. You have to think, why would any lender want to lend to you if you are unlikely to repay in full.

Why would you get a CCJ?

CCJ's aren't just obtained because you missed a few payments, lenders will usually only pursue a CCJ if they have firstly put you on a default and have also tried to set up payment arrangements for you to pay them back with terms that are easier for you. There are laws stopping lenders from using forceful tactics to obtain repayment of a loan. If a lender wishes to issue you with a CCJ, they must serve you notice that they will do so. This gives you time to formulate a defence against the loan. This doesn't mean you are in the right, but it means that lenders can't try to get their money back unfairly.

What could you do to stop it?

If you've already tried to keep up with payments but failed, all is not lost. Speak to your lender and try to come up with a suitable arrangement to repay your loan. Provide a detailed breakdown of your monthly finances and reach an agreement. If you've done this, then it should never get to the stage of being issued a CCJ.

If you feel the lender is in the wrong, you do have the right to defend the claim before it ever reaches the court room. However, please be aware you may lose and still be issued with a CCJ.

If you are issued with a CCJ, you have 30 days to pay or you risk of bailiffs being sent by the court to obtain the funds. Usually, if you pay the settlement after the ruling of the court, your CCJ won't reach your credit file.

Getting one removed

A CCJ can only be removed if it has been added to your credit file by mistake. Once a ruling has been made then it will remain on your credit file.

6 year rule

Your credit file will always contain a history dating back 6 years exactly.. This is seen as the adequate amount of time for a person's credit history to be judged. As time goes on your score will improve as any missed payments, defaults or even CCJ's are longer in the past.

Once 6 years has passed since your credit report comes through, your previous records will vanish from your credit file.

What to do now?

Sign up to one the websites we mentioned, carefully look at your credit report and evaluate your payment history, defaults and any CCJs that may be against your name. It shouldn't be too long before you'll get a good picture the reasons you are being rejected.  With this information and the details in this blog you'll soon be able to find out exactly what is hindering you.

2020 Update

Not much has changed in the last 2 years, but we do recommend checking your credit profile at multiple other sites regularly to keep up to date.