If you’ve never missed a payment you must have a perfect credit score
The fact you’ve never missed a payment is definitely better than if you have defaults, however, this isn’t how companies decide how big a risk you are.
They will consider your current credit limits and how close you are to the maximum limit. For example, if you have a credit limit of £5 000 and you’re balance is £4 500, this may be a sign that you’re borrowing more than you can afford.
Their criteria may also involve means testing which would consider your current debt level compared to your current income. If you make £20 000 per year and have £18 000 of debt, you would be seen as high risk even if you’ve never missed a payment as your debt level is a very high percentage of your annual income.
Trust Deed Scotland may be able to help you get your finances back on track. Try the Trust Deed Wizard tool now for more information.
You can’t get credit if you have a poor credit score
It is possible to get a credit card with a poor credit score. In fact, there are credit cards specifically designed for people with bad credit.
Getting one of these cards can help you begin to rebuild your credit score as long as you keep your payments up-to-date. However as you will be seen as high risk, the chances are the interest rates will be high and if they offer a 0% interest period, it will be shorter than what’s on offer for other cards.
It’s a good idea to clear your balance in full each month and remember only to spend what you can afford to avoid getting yourself into further debt.
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If your credit history isn’t great, your credit limit will be very low
Your credit limit will not necessarily be low but it should be within a reasonable range of what you can afford. You will probably be charged a higher rate of interest. This insures the company makes more money if you do miss any payments.
Your credit limit will usually be increased incrementally after you demonstrate you can borrow responsibly. You can show this by borrowing small amounts regularly and paying them on time in full.
Read our info hub article for 10 Frequently Asked Questions about Trust Deeds.
If you’ve had an application for credit declined you won’t get accepted anywhere else
As every lender has different criteria, this isn’t necessarily true, however, failed applications do lower your credit score which can have a negative impact on future applications.
It is important not to make too many applications within a short space of time as other companies will see these applications and you will look like more of a risk.
To check the likelihood of approval, you can do a ‘soft search’ to see what companies are likely to approve your application. This doesn’t guarantee a successful application but it means you will get a better idea of your chances without affecting your credit score. These checks are not visible on your credit file to lenders.
Find out what happens when you are discharged from a Trust Deed.
Debt solutions and defaults will stay on your credit file forever
Your credit file is cleared every 6 years. This means if you have entered into a Trust Deed, have gone bankrupt or have defaulted on payments, these entries will be removed from your file 6 years after the event.
You may be able to get credit during this period but it will be more difficult. If you do manage to get credit, borrow small amounts and make sure to pay them back promptly. This means your credit file will show you have been borrowing responsibly, so once the six year period is up, you’ll be more likely to be approved for important credit applications you make.
To find out more, see our Scottish Debt Advice FAQs, or Contact Us.