If you’ve been refused car finance, a loan, credit card or even a mortgage, you may be wondering why. There are many reasons why you may be declined when applying for finance but the most common reason to be declined for finance is a bad credit score. Your credit score is really important, it’s an indicator to you and lenders of how good you are at managing your money and paying back debts. Here are the main causes of a bad credit score.
Missed or Late Payments
Multiple Credit Searches
If you make multiple searches for credit, this can harm your credit score. If you apply for something like car finance with bad credit and you get declined, and apply elsewhere, you could be harming your credit score with each application. When you make multiple applications for finance, it can look to lenders like you are desperate for credit and haven’t made an informed decision.
Defaulting On Your Loans or Debts
County Court Judgements (CCJs)
If you haven’t heard of a CCJ already, it’s a type of court order that is usually given to you if you fail to pay back any money that you owe.
When your account goes into default, lenders can ask for a County Court Judgement against you. Like a default and bankruptcy, a CCJ can stay on your file for up to six years. You can resolve a CCJ by paying off the amount of debt you owe within a month.
Lack of Credit
Basically, to obtain credit, you need to have credit, and everyone has to start somewhere! If you’ve never borrowed money before or even taken out a mobile phone contract, you can’t prove that you are good at managing your money so your credit score may not be the best.
Building your credit takes time. You could consider taking out a credit building credit card which is available from many credit card companies. They usually have a low credit limit and making a few purchases then paying off the balance each month is a great way to build your credit score.