Your credit rating is nothing more than a number that predicts the probability that any credit granted to you will be repaid. When you apply for credit, a lender will compare your credit rating to their cut-off point. If your rating falls below their cut-off point, they will consider you too risky and refuse to grant you credit.
Why should I repair my credit rating?
Like most people, you will almost certainly need credit in the future. You may want a mobile phone, insurance, a car, or your own house. Unless you have thousands of pounds in a bank account, which is very unlikely after bankruptcy, you will need a loan, a mortgage or other finance.
If you are going through bankruptcy or are discharged bankrupt, your credit rating will be low. Therefore, you must improve your credit rating to avoid high fees and interest charges. Starting early is essential, as increasing your credit rating will take time. It may take years!
How is Your Credit Rating Calculated?
Contrary to common belief, your credit rating is not something that exists. Equally, it is not derived from a credit reference agency. It is the lender you are applying to that calculates it.
A credit scorecard will be used to calculate your credit rating. The scorecard shows how many points you should be awarded for each piece of information that:
- You provide them with
- They hold about you
- They obtain from other organisations, such as a credit reference agency
Each piece of information is weighted differently. For example, bankruptcy carries much more negative weight than a payment missed 5 years ago.
How does bankruptcy affect your credit rating?
Unfortunately, most lenders look upon bankruptcy negatively, which means they will assign you a poor rating.
Fortunately, a specialist group of finance companies called “sub prime lenders” specialise in lending to people with bad credit. These companies have a cut-off point lower than your traditional high street lender.
How can I Improve my Credit Rating?
To improve your credit rating, you will need to repair your credit. Go to the credit repair after bankruptcy page for more information.