What is a credit record?

It is a history of how you manage your personal finances, including:

  • All your active credit agreements, and closed agreements from the past six years

  • Transaction history for each account including, what you owe and any missed payments

  • Personal details like your date of birth, address and previous addresses

  • Any defaults, county court judgements or bankruptcy notices

  • Any active debt management plans or individual voluntary arrangements

How does it affect your loan application?

Almost all lenders check your credit record when you apply for a loan and only offer their best rates if you have a strong credit history.

When you apply for a loan, lenders also check:

  • Your income

  • Your existing financial commitments

For joint loans, they will check the same details of the person you are applying with.

They use all this information to decide how risky you are and whether or not to offer you a loan.

Does it affect the cost?

Yes, lenders usually use your credit record to work out how risky it is to lend to you and what interest rate to offer you on a loan, this is called risk based pricing.

When lenders advertise their loans they show a representative annual percentage rate, which they only have to offer to 51% of borrowers.

This means when you apply you may not get the advertised rate for a loan, instead the lender can offer higher rates if you have bad credit or little credit history.

What happens if you apply with bad credit?

If you have bad credit when you apply for a loan, lenders may:

  • Offer you a higher interest rate

  • Offer you a smaller loan

  • Reject your application altogether

Before you apply

Check your credit record is accurate and there are no mistakes.

For example, old accounts that should be closed being listed as still active, or incorrect personal details like your address being incorrect.

If you are worried that poor credit could stop you from being accepted for a loan you could look into bad credit alternatives.