Cleaning Up Your Credit File after Bad Credit

Having money problems can be traumatic, especially when it comes to bankruptcy and everything associated with it. It is probably one of the most stressful things that can happen to a person, but the good new is that nothing is forever and there is a way back, as there are a number of things that you can do to help the process along.

An IVA or a bankruptcy notice is going to sit on your credit file for a minimum of 6 years from the point it started, so the job of rebuilding your credit status isn’t going to start until it’s completed. However, it doesn’t hurt to start employing the right financial habits, even before you’ve settled your debts. The 6 year point is the magic figure though, as even if you clear monies owed before that point, this is when it will disappear from your credit file for good.

Points of note: It’s important that you check that none of your credit defaults are incorrectly dated after your DMP, bankruptcy or IVA started, as this will cause you problems. If they’re wrong, tell your creditors to amend their records. Also, if you’ve completed your IVA and as yet haven’t received your completion certificate, it might be worth checking with your IVA company as to its likely date of arrival.

Checking with all three UK credit reference agencies that your correct status is showing is important too, as some creditors don’t report to all of them. For example, if you’ve been discharged from bankruptcy or you’ve finished your IVA or DMP plan, it should be shown on your file. There’s no point raising the issue with Equifax, TransUnion or Experian, as they will just contact your creditors to rectify the issue. The quickest way is to contact the offending creditors directly – in writing.

Get Some New Credit

Whilst it might seem counterintuitive, one of the first and most important things you can do is to start new credit accounts, like perhaps a low credit card with a nominal credit limit. Many people recovering from bad credit issues swear blind that they’ll never EVER have a credit card again, but this position only means that it will take longer to rebuild their credit rating. Managing your credit the right way illustrates an ability to use it wisely and responsibly and it can really boost your score.

You’ll probably have issues getting a major credit card if you have a low credit rating, but that doesn’t mean that you’ll get refused by them all. There are other options, such as:

  • A secured credit card
  • A retail store card
  • Specialist credit cards for people with bad credit e.g. Vanquis Bank

If you’d prefer to stay away from traditional types of credit card, there is another savings based product that will work just as well at building your credit score. The product is called Loqbox and you basically pay into it for a year and get your money back at the end. It’s that simple and as it’s technically a form of credit, each payment you make into it will illustrate your ability to make regular payments.

You shouldn’t go crazy with applications for credit, thinking that it improves your chances, as it does you no good at all to keep applying. Each application for credit leaves its mark on your credit file. Too many and it can worsen your chances of getting accepted with anyone.

We would recommend avoiding the payday loan market, as it is known for charging exorbitant rates of interest that can quickly push you back into the cycle of bad credit. Another reason is that the three major credit agencies TransUnion, Equifax and Experian view high cost lending dimly, so have accounts like these actually do more harm than good.

Carry On as You Mean to Go On

If you don’t change your spending habits, you can’t hope to expect a different outcome, so you should try and continue the habits you’ve had to follow since your money problems began. It’s the foundations upon which your future financial stability is going to built, so it’s a bit of a must.

Getting into the habit of buying only the things you can afford and living within your means is the best way way to make sure that old routines don’t set back in.

Pay on the Dot, Every Month

If you’re operating a credit card or store card after your money problems, it’s vital that you pay everything on time, without fail. Credit scores are quite easily influenced with even a missed payment showing up, so it’s important that you don’t allow that to happen. Even though you might think “just one won’t hurt”, it could, so it’s better to be safe than sorry and winding up back where you started.

So, there you go. To help your application for bankruptcy mortgages, IVA mortgages and mortgages after CCJs, employ these basic measures and you improve your chances of a good credit score and a successful mortgage application.

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