Yes.....The terms you are offered, however, will vary according to how big a risk you appear to be. If you have CCJs, Defaults or Arrears, you can expect to pay a higher rate of interest. Generally speaking, you will find it far easier to obtain a secured loan rather than an unsecured loan. In the former, the lender's risk is limited by the security, normally property, on which he is lending. In the latter, the lender's risk is largely determined by the ability and willingness of the borrower to repay.
The vast majority of lenders use one of two major credit reference companies, Experian and Equifax, in deciding whether to grant credit. These companies hold credit files on nearly all of the adult population of Britain so if you, or someone at your address has defaulted, has a CCJ or otherwise has had financial problems, then it's going to be on record.
Your credit record is usually searched every time you apply for a loan, hire purchase, store credit or any other form of borrowing. So your credit history affects the terms you are offered or whether you can obtain a loan at all. The High Street banks and Building Societies tend to be very conservative in their lending policies and may turn down applications from anyone who has experienced significant credit problems.
However, there are many well established and reputable financial services companies who will offer loans and mortgages based on your present circumstances rather than your history. There are also many brokers or intermediaries who advertise a specialization in helping people with a bad credit record. However, be careful as many charge a fee just to try to obtain credit for you without any guarantee of success. We would advise that you only deal with reputable brokers who are members of well-known trade associations, such as the Consumer Credit Trade Association. Brokers who specialize in secured loans may describe themselves as FISA registered, meaning that they must follow the code of practice set by the Finance Industry Standards Association.
We would not advise that you get involved with so called 'credit repair' companies as they don't do anything that you can't do yourself.
Make sure there is no incorrect information on your credit file, which is affecting your credit rating. You can check this by applying for a copy of your file as shown below. If you believe strongly that your credit file is unrepresentative of your credit worthiness, you can ask the credit reference companies to insert a Notice of Correction, which must be then viewed by everyone who sees your credit file.
Make sure you are on the electoral register as lenders use it to confirm your name and address.
Do not become frustrated when you are turned down for credit. The number of credit applications you make is recorded on your credit file and is used by many lenders as part of their credit scoring systems. Do not keep applying again and again. It can be a vicious circle with lenders turning you down just because other lenders have.
Ensure that you and other family members pay your bills on time. Do not exceed your credit limits on credit cards and other revolving credit. Do not exceed your bank overdraft. Apply for new credit accounts only as needed.
Secured Loan
A secured loan is secured on your property by the lender. This means that the lender is minimising the risk of losing any money and so can offer a secured loan at a lower APR (Annual Percentage Rate) than an unsecured loan. A Secured Loan is also easier to obtain as adverse credit history such as arrears, defaults or CCJs can be largely discounted. In the case of a good credit history, some lenders will offer secured loans in excess of the equity available in the property. In all cases with secured loans you should be aware that your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.
Unsecured loan
An unsecured loan costs more in repayments but does not carry the risk of you losing your home, as in the case of a secured loan. If you don't repay an unsecured loan, the lender can't take your house off you. For this reason, it's often difficult to get an unsecured loan if you have an adverse credit history. An unsecured loan should have the advantages of being faster and cheaper to take out. It can also be more flexible and the borrower may feel that he/she has far greater control of it.
Credit Checking and Credit Files
No-one has a right to credit. Before giving you credit, lenders - such as banks, loan companies and retailers - want to check whether you are an acceptable risk.
To help them do this, they may check with firms called credit reference agencies to get some basic details about you and your credit record.
These agencies do not keep blacklists or give any opinion about whether or not you should be given credit. They simply provide information about your credit record. It is the lender who decides whether you are an acceptable risk.
To get a copy of your credit record, you can apply to one of the main agencies either on-line:
equifax
experian
callcredit
or by post, You'll need to give your full name (and maiden name if appropriate),date of birth, current address, including house number, street name, district, post town and postcode plus any addresses lived at during the last 6 years.
Enclose a cheque or Postal Order payable to your chosen agency for the statutory fee of £2.00 and send your letter to:
Equifax Plc
PO Box 1140
Bradford
BD1 5US Experian
Consumer Help Service
PO Box 8000
Nottingham
NG80 7WF Callcredit plc
PO Box 491
Leeds
LS3 1WZ
Credit scoring
Many lenders use computerized credit scoring systems which allocate points to various pieces of information given on your application form, such as your age, marital status, your occupation, whether you own your home and whether you are on the electoral register. These points are added together to produce your credit score. This helps the lender predict whether you are an acceptable risk.
Different lenders have different systems and pass marks, so you can be turned down by one but accepted by another. Your credit score is not part of the file kept on you by the credit reference agencies.
Lenders do not have to tell you exactly why they have turned you down, but they should give an indication of the reason.
Your rights
If you are refused credit you have certain rights. In particular you have the right: to know the name and address of the credit reference agency that the lender contacted for details about you; to see any information held about you by that agency; to correct any inaccurate information.
You must act within 28 days of the last time you contacted the lender about the credit deal. The OFT's leaflet No Credit? gives more details about your rights to see your credit record and amend it. The Data Protection Registrar may also be able to intervene in a dispute with a credit reference agency.
Most people at some time will use credit to purchase goods or services, for example, by obtaining a personal loan through a bank or building society, hire purchase, or a credit agreement with a trader. Before buying anything on credit you should consider the following points.
Work out what the total cost of the loan will be. Can you afford the repayments? Look at the length of the loan not just the monthly repayment. The longer the loan period, the more interest you'll pay back.
Shop around for credit to get the best deal. There are many different types of credit, which all charge different interest rates.
Check the APR : the Annual Percentage Rate of charge is an expression of the total charge for credit for each year of a credit agreement. Generally speaking, the lower the APR the better the deal. Sometimes a low APR is only offered for a short period. Some traders offer interest free credit (0% APR ) but you will need to take care that you are not paying higher amounts in other ways; for example, it may be a higher cash price than you would pay for the same goods elsewhere.
Make absolutely sure you have read and understood all credit agreements before signing them. If there is anything you do not understand, ask.
Check whether the loan has a variable rate of interest. If it has, your repayments can go up as well as down. Make sure you can really afford it.
Watch out for other charges, such as a broker's arrangement fee.
Is PPI (Payment Protection Insurance) included? Have you asked for it? You don't need to take out PPI if you don't want to. It can be expensive and may not cover you if you are self-employed or on a short term contract.
Some loans are only given if they are secured on your home. These are not available if you rent. A secured loan gives security to the lender, not to you. If you cannot keep up with the repayments the lender can sell your home to cover any loss. You might get a lower rate of interest with a secured loan but you could have a lot at stake.
You have a short time in which to change your mind.
When you sign, you should be given a copy of the credit agreement, which sets out your cancellation rights.
You cannot normally use your rights to cancel purchases made with a credit card because you will have entered the agreement for the card some time ago
You can withdraw from any agreement before it has been signed by both you and the lender. This means acting quickly.
If you have already signed, you will have to let the lender know that you have changed your mind before they sign. It's probably best to phone, fax or e-mail and then confirm by post.
The effects of withdrawing are the same as cancelling.
This is particularly important with agreements secured on your home where the lender must send you an advance copy of the agreement at least seven days before sending the actual agreement to be signed.
The lender must not contact you during this consideration period to give you time to think about the deal (but you can contact them.
If you use a broker to get a loan, including a mortgage or a loan secured on your home, you will probably be charged a fee for the service.
Make sure you know what this will be before you commit yourself. If, however, you do not enter into a loan agreement within six months of being introduced to a possible lender, the broker can only charge a fee or commission of £5 and if you have already paid more you can recover the excess.
Similarly, other fees, such as a survey fee paid to the credit broker in connection with a loan that you do not eventually take up, are also refundable if you are borrowing £25,000 or less.
Yes - buying on credit does give you some extra rights, for example, if goods are faulty.
If a trader has an arrangement with a finance or credit card company to allow you to pay by credit, you have extra protection. This applies if the goods cost more than £100.
The credit company is equally liable for a breach of contract or misrepresentation by the trader. For example, if the goods are not delivered or are not what you ordered, or a holiday was wrongly described or you did not get what you paid for, you may be able to claim from the credit card or finance company. It is sensible to approach the trader first. You can, however, make a claim against the credit card issuer or finance company without going to the supplier first.
You do not have these rights if you pay with a debit card (where the money is taken out of your account immediately) or a charge card (where you must pay all you owe within a few weeks of receiving the account). This area of law can be interpreted in a number of ways.
You may find that part way through repaying your loan, you have enough money to pay off the whole amount owing in one go.
If so, you could be entitled to a rebate of some of the charges you would have paid over the rest of the life of the loan. It depends on the type of agreement you have with the lender.
It can sometimes cost more than you expect to settle up early. Even so, settling early will cost less than carrying on with the repayments plus interest for the full length of the loan.
How can I get out of debt?
The sooner you face any debt problem, the easier it will be to solve it.
Don't ignore it and hope it will go away. If you do, you could end up in court, lose the goods you've bought or find it difficult to get credit in future. You might even lose your home. Even if you aren't up to your neck in debt, it's surprising how quickly it can build up and how long it takes to pay back.
Work out exactly how much you owe, who you owe it to and what you can pay back. This will help sort things out in your mind, and help your creditors to see where you stand.
Contact the creditor(s) as soon as possible to explain the problem and try to come to some agreement about repayments. Your debt won't be written off but you might be able to pay it back in smaller payments over a longer period of time. This will probably cost you more in interest payments in the long term but may be more manageable now.
Follow a five point action plan:
How much do you owe? List your debts. Work out when payments fall. Identify the priority debts.
How much do you earn? Work out how much money you have coming in. Are you claiming all the benefits you are entitled to? Are you paying too much tax?
What do you spend? List your essential and less essential spending. Compare it with your incomings. What do you have left over to offer to creditors?
Nothing left over? Are there any areas in which you can cut down your spending? Is there any way in which you could earn extra money?
Talk to your creditors. Send them a financial statement showing your income and outgoings. Explain your offer to pay off your debt.
They are known as mini-bankruptcies. Under an administration order the court takes over the administration of the debts of a person while an agreed regular amount is repaid. Currently, any debtor with at least one CCJ registered, can make application to the court for an administration order. If granted, this provides protection from further action by creditors in respect of any debts listed under the order.
Creditors not included in the order cannot pursue their debts separately through the courts – if they try, these debts are automatically added to the administration order.
A varied administration order is where the amount of debt agreed under the original administration order is changed, or a new debt added. A varied order replaces the original administration order.
If a creditor can prove to the Court that a debt is owed, the Court will give judgement to the creditor and the debt will have to be repaid. The creditor can then ask the court to recover the debt in various ways, including the use of an attachment of earnings order and Bailiffs.
If a county court has ordered you to pay, called “having judgement entered against you”, details of the judgement will usually be entered on the Register of County Court Judgements. Most entries stay on the Register for six full years. The Register is maintained by the Registry Trust, a non-profit organisation.
CCJs paid within one calendar month can be removed from the Register. Where the CCJ is paid outside one calendar month, the CCJ will be marked on the Register as “satisfied” but will reported for the six years. For a CCJ to be marked as “satisfied”, you need a certificate of satisfaction from the county court concerned. You will need to quote the case number to the court and provide the court with written evidence that the CCJ has been paid in full. There is a court fee of £10.
CCJ registrations can also be removed if they were entered in error or paid before the court action. Application must be made to the court to have the CCJ set aside for which a court fee of £50 is payable.
You can require the credit reference agencies to include a “notice of correction” on your credit file in order to explain the information held. Where the notice relates to a CCJ, Registry Trust operates an exchange for the credit reference agencies. You need notify only one and the rest will be notified automatically.
24th June 2008
The average cost of a two-year fixed-rate mortgage has broken through the 7% barrier.
Homeowners wanting to take out a two-year deal can now expect
