Bad Credit Advice – Credit Reference Agencies

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Credit Reporting

**Disclaimer – this information is based on own experiences and is correct as of 12/07/2014**

I’m sure you will be aware that credit account information will be recorded on your credit file for 6 years from the date the account was settled/closed or defaulted. However, the reporting of the payment history of that account is not as straight forward, with each of the 3 credit agencies (Equifax, Experian and Call Credit) operating separate policies on the reporting of payment history. Here are the details of how long the agencies report payment history:

Experian

Payment history will stay of your credit file for the previous 6 years from the date the account was settled/closed or defaulted (or previous 6 years is account is still opened).

Equifax

Payment history will stay of your credit file for the previous 4 years from the date the account was settled/closed or defaulted (or previous 4 years is account is still opened).

Call Credit

Payment history will stay of your credit file for the previous 6 years from the current date (regardless if the account is open or settled/closed/defaulted).
 

Credit Reporting Examples

So here are some examples to show how different scenarios would be reported differently by each of the agencies:

Example 1

Date Viewed Credit File/Current Date: 30/06/2014
Credit Account Closed: 30/06/2012
1 Missed Payment: 30/06/2007

Will the missed payment appear on credit file?

Experian: Yes (the missed payment occurred within 6 years of account being closed, and the account was closed within the last 6 years)
Equifax: No (the missed payment occurred over 4 years before the account was closed)
Call Credit: No (the missed payment occurred over 6 years before the date when we viewed our credit file)

Example 2

Date Viewed Credit File/Current Date: 30/06/2014
Credit Account Closed: 30/06/2010
1 Missed Payment: 30/06/2007

Will the missed payment appear on credit file?

Experian: Yes (the missed payment occurred within 6 years of account being closed, and the account was closed within the last 6 years)
Equifax: Yes (the missed payment occurred within 4 years of the account being closed, and the account was closed within the last 6 years)
Call Credit: No (the missed payment occurred over 6 years before the date when we viewed our credit file)

Example 3

Date Viewed Credit File/Current Date: 30/06/2014
Credit Account Closed: 01/07/2008
1 Missed Payment: 02/07/2002

Will the missed payment appear on credit file?

Experian: Yes (it is within 6 years of account being closed, and account was closed within the last 6 years)
Equifax: No (the missed payment occurred over 4 years before the account was closed)
Call Credit: No (the missed payment occurred over 6 years before the date when we viewed our credit file)

In the last example, the missed payment appears on the guys Experian credit file for almost 12 years. Had the chap closed the credit account a month later (01/06/2008) then he could have halved this to 6 years (as the missed payment would have been older than 6 years when the account was closed and so would have ceased being reported when the account was closed).


Lending Options

Obviously your options for lending are rather restricted when you have a poor credit history, but here are some options that may be available to you:

Local Credit Union – I strongly recommend this as an option. Even with my poor credit history, I was able to get a consolidation loan for £6,000 at a rate of 14.9%. They base their decision on your circumstances and it is made by a human, not a computer. I am a member of Glasgow Credit Union (which is the largest in the UK) and they offer everything from short term loans up to mortgages. Each CU is different, so check what your local CU offers and become a member.

Guarantor Loan - a guarantor loan means that you need someone with a good credit history to agree to continue the payments in the event that you default. Because of the guarantee, it allows them to offer loans at a rate of around 49.9%, which otherwise may not be available to someone with poor credit history. There are multiple guarantor loan companies, but I have only dealt with Amigo loans who I would highly recommend.

Poor Credit Loan – there are still some companies out there who offer loans to people with a poor credit history. One such company that I am aware of is Everyday Loans who offer loans at about 79.7%. I have not had any dealings with them, so cannot comment on them.

Payday Loans – often, these are one of the few lenders who lend to people with a poor credit history. However, once you start using them it can be extremely difficult to get yourself out of them and for that reason, I would strongly recommend against them.


Credit Files

All three credit agencies offer credit reporting and credit scoring. Here are the current costs;

• Equifax – Unlimited credit reports and credit scores - £14.95 p/m
• Experian - Unlimited credit reports and credit scores - £14.99 p/m
• Call Credit (Noddle) – Credit report updated once a month is free. Credit scores for a year is £30 (per year)

In addition to going direct to the agencies themselves, there are some third party companies offering services. The ones I am aware of are;

• Check My File – Credit report with credit scores updated once a month, with info taken from all three agencies - £7.99 p/m
• CCP – Unlimited Experian credit reports - £6.00 p/m

I have tried them all with the exception of the Noddle credit score, and I believe the best to be Experian as it gives the most detailed information about what is affecting your score as it is not just defaults and missed payments that can affect your scores. Some of the additional aspects that can negatively affect your score are;

• Average duration of accounts
• How much of your available credit is used
• How many credit searches you have had
• How many credit account have been opened recently

Credit searches, although reported for 1 year, have the biggest impact when they are within the last 6 months. And missed payments have the greatest detriment to your file when they are within the last 12 months.

Not all credit agencies report the same account information. In my experience, Call Credit reports the most amount of credit accounts, with Equifax reporting the least.

(**Please note that the scores that the credit reference agencies give you is not necessarily the same scoring the lenders will give you, as the lenders use other information from your application such as salary to decide your ‘score’, but they do help give an indication of the health of the information contained in your credit file**)


Payday Lenders – WARNING!

Often the only people willing to lend to people with poor credit are Pay Day Lenders. This is because the astronomical interest rate they charge covers them against any potential losses. However, the situation can deteriorate rapidly to the point when you are taking out one Pay Day loan to pay of another, with no end in sight. Unfortunately, this is a trap I found myself in which began when I took out a Pay Day loan to cover a monthly credit card bill as I did not want a late credit card payment to appear on my credit file. Shortly after that I was taking out another loans for car repairs, and another for a wedding I was attending, and another and another….

Over the last 3 years and 3 months I have taken multiple loans out with 11 different Pay Day lenders. The interest on these loans over that period has amounted to an incredible £25,387.06 – and that is just the interest.

The highest APR I paid on a loan was 47,700,103 %. That is not a typo – 47.7 million percent! This was for a £150 loan over 7 days, which I repaid £207.75 (I repaid this on time and the 47.7 million percent APR is what is quoted on the credit agreement).

Fortunately, I changed jobs about a year ago and went from earning around £21,000 a year to £50,000 which has allowed me to pay off all my Pay Day loans (with the help of a credit union and guarantor loan). Had it not been for this, I would have almost certainly had to enter an IVA or some other sort of debt management plan. Because I was able to avoid this, and avoid missing any payments on my Pay Day loans, my credit history has steadily been on the increase and I have no missed payments in the last 12 months. Hopefully when I start to bring down the balance of my credit cards and clear of some existing loans (Guarantor and Credit Union) my credit will be up to about average. Whatever happens, I will not be using Pay Day lenders again. It is also worth noting that the short duration that a Pay Day loan appears on your credit file can negatively impact your credit score, even if you keep up with all your payments.

I hope that these information will help others in similar positions to myself. I have been battling poor credit for about 10 years now and I am just starting to emerge from it, so if anyone has any questions, feel free to post them and I will do my best to answer them.

Eonel

In my opinion, some good observations & a few bad.

The worst observation is your comment on Amigo loans. Guarantor loans are a total rip-off and in desperate need of FOS investigation and regulation.

The Amigo advert makes out that it is going back to old fashioned banking. In reality, at 50% APR this could not be further from the truth. The Guarantor is not just guaranteeing the loan - they are wholly responsible for it. Amigo do not care who the original person named on the loan is - they may not even be vetted and will never be pursued for the debt.

Guarantors have to have good a good credit record - yet are charged 50% APR for the loan on the pretence that they are just guaranteeing the loan for someone else. The strong recommendation is if a Guarantor loan is being considered, the guarantor should borrow the money from their own bank, give the money to the original person and reach an agreement between them on how the money should be transferred to make the payments. The same effect will be achieved as a Guarantor loan and a LOT less interest will be paid.

My other observation is not to over state the significance of historic missed payments. In isolation, a single missed payment over a year old with an otherwise clear credit history will not significantly prejudice your credit history and although it remains in your record should not be a cause for concern.

GingerBob_3

What we really need is a cross reference between lenders and CRAs. It seems Equifax is the least liable to screw you over, so who deals solely with Equifax (if anyone)?

back-in-black

Eonel wrote: »

In my opinion, some good observations & a few bad.

The worst observation is your comment on Amigo loans. Guarantor loans are a total rip-off and in desperate need of FOS investigation and regulation.

The Amigo advert makes out that it is going back to old fashioned banking. In reality, at 50% APR this could not be further from the truth. The Guarantor is not just guaranteeing the loan - they are wholly responsible for it. Amigo do not care who the original person named on the loan is - they may not even be vetted and will never be pursued for the debt.

Guarantors have to have good a good credit record - yet are charged 50% APR for the loan on the pretence that they are just guaranteeing the loan for someone else. The strong recommendation is if a Guarantor loan is being considered, the guarantor should borrow the money from their own bank, give the money to the original person and reach an agreement between them on how the money should be transferred to make the payments. The same effect will be achieved as a Guarantor loan and a LOT less interest will be paid.

My other observation is not to over state the significance of historic missed payments. In isolation, a single missed payment over a year old with an otherwise clear credit history will not significantly prejudice your credit history and although it remains in your record should not be a cause for concern.

Thanks Eonel, I take onboard what you say about guarantor loans. Given that the loan is being guaranteed by someone with good credit, the rate is exceptionally high. I may not have realised this at the time purely because the rate is still much better than what else was on offer (i.e. compared to Everyday Loans and Pay Day Lenders).

In the guarantor loans defence over simply having a friend lend you the money, the repayments are reported back to the credit file of the person with poor credit (which may help them build credit) and it also means that there is no liability on the 'guarantors' credit file, and so should not affect their ability to get credit.

back-in-black

GingerBob wrote: »

What we really need is a cross reference between lenders and CRAs. It seems Equifax is the least liable to screw you over, so who deals solely with Equifax (if anyone)?

Hi GingerBob, here is the information I have with regards to credit reporting (not credit searching);

Loans
Amigo Loans - Equifax, Experian, Call Credit
Glasgow Credit Union - Equifax

Credit Card
Aqua - Equifax, Experian, Call Credit
Vanquis - Equifax, Experian, Call Credit
Barclay Card - Equifax, Experian, Call Credit
Capital One - Equifax, Experian, Call Credit

Other
JD Williams - Equifax, Experian, Call Credit
O2Equifax, Experian, Call Credit
Natwest Overdraft - Equifax, Experian, Call Credit

Payday Lenders
Wonga - Experian, Call Credit
Lending Stream - Experian, Call Credit
MEM - Experian, Call Credit
Mr Lender - Experian, Call Credit
Payday Express - Call Credit
Quick Quid - Call Credit
Peachy - Call Credit
Uncle Buck - Call Credit
Pounds to Pocket - Call Credit
Quid Market - none
My Jar - none
Sunny Loans - none

Eonel

back-in-black wrote: »

In the guarantor loans defence over simply having a friend lend you the money, the repayments are reported back to the credit file of the person with poor credit (which may help them build credit) and it also means that there is no liability on the 'guarantors' credit file, and so should not affect their ability to get credit.

Guarantor loan do appears on the file of the person with bad credit and this can help build a credit history. But you are paying a very hefty premium for this - 50% interest instead of potentially 5-10% if taken out by the guarantor. In cases where the person with poor credit history subsequently has repayment problems, the loan will become a liability on the Guarantors file.

Guarantor loans would be a good product & "good old fashioned banking" if the APR charged was appropriate to the Guarantor. As it stands today, along with Loan Brokers, they are one of the things that is broken in the Financial system.