The Effects of Bad Credit

Your credit report is a record of your past uses of credit and repayment, giving lenders an indication of whether or not you will pay back the finance you are looking to borrow.

When applying for different types of credit such as loans, mortgages or finance packages for vehicles; most lenders will look at your credit report and score to judge if you are a trustworthy person the loan money to. The amount and type of information available for lenders to see will depend on the information that is publicly available regarding you, such as if you are registered to vote and if you have any court convictions.

The reason Electoral Roll information is used and is considered relevant by lenders is that it shows you are settled, and it is used to check your name and address against the details you have provided.

Court records are also publicly available, if you have IVA’s, bankruptcy or County Court Judgements this would indicate a history of debt problems. If you are taken to court by a debt collection agency then this will also show up.

Past credit searches from other companies will also show up on your record. This is especially relevant when applying for loans or finance. If a lender sees you have made 10 applications in the space of two days it would suggest the customer has been turned down several times and might be unlikely to be a trustworthy borrower.

General bank account information is also shared, so your account behaviour and usage is also monitored. This includes an activity in an overdraft, whether it is arranged or not, and would indicate that perhaps money management may be an issue.

Using all of the above factors as indicators companies will assign you a credit score. Credit scores can be changed positively as you successfully make repayments on credit cards or loans. Defaults or missed payments will negatively alter this score.

Applying for a Loan

Having a poor credit score could prevent you from being accepted for a loan, lenders use the credit score to assess how likely you are to repay the loan.  Having bad credit would indicate that you have previously experienced financial difficulties or failed to repay a source of credit in the past, which could result in the lender declining your application.

Even if you do get accepted for credit it is likely that you will have to pay higher interest rates on the credit. This is due to the lender taking a bigger risk by lending you the money when compared to someone with a good credit score

Difficulty purchasing products or services

If a customer has a bad credit score, they may find more ordinary sources of credit, such as mobile phone contracts, harder to obtain. This could potentially make things more expensive by having to use a Pay as you Go SIM card.

The same goes for Utility companies; if they do not see you as a ‘fit person’ credit-wise you will be asked to pay a security deposit in order to secure use of their services.

Does bad credit affect your ability to get a house?

Landlords or estate agents will often make credit checks on people when they are applying for a house. It is important for them to make sure you will be able to pay the rent on the house once moved in.

Does UK Loans perform credit searches?

Using UK Loans Smart Search does not undertake a credit search and sets you up with the cheapest lender available to you, giving you a better chance of being accepted.

UK Loans comparison tables also provide you with the option of looking through lenders who are more likely to accept an applicant with bad credit.


As always UK Loans would suggest that you visit a debt help company if you are struggling with debt please visit the sites below if this is the case.

Debt advice from the Citizens Advice Bureau

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