Getting credit in a credit crunch

In a credit crunch, getting approved for credit isn’t easy. Lenders are being very careful about lending money, partly because they’re finding it hard to borrow from other financial institutions.

Today, in the middle of this credit crunch (also called a ‘lending squeeze’) many people are finding they can’t get approved for a mortgage, a loan or a credit card. Of course, getting approved is – and always was – easier for some people than for others…

Who’s getting approved?
When you approach a lender, they’ll probably ask Equifax, Experian and / or Callcredit (the UK’s Credit Reference Agencies) for your credit report. This gives them information about your debts and your finances in general: things like defaults, arrears and County Court Judgments (CCJs) will stay on your report for 6 years.

So your credit report helps them decide whether or not to extend you credit. Basically, the better your credit rating, the better your chances of getting approved for a loan. Anyone who’s had problems repaying debts in the past might find that lenders either won’t give them credit or will charge them a higher rate of interest. In general, they’re more likely to be successful if they talk to a lender who specialises in helping people with past / present credit problems.

Getting approved – 10 tips
In a credit crunch, it’s more important than ever to maximise your chances of being approved:

1. Open a bank account. This shows lenders you’re used to dealing with money.
2. Register on the electoral roll. So lenders can confirm your identity and address.
3. Don’t take out credit you can’t comfortably afford to repay. You could get yourself in real financial trouble – and do some real damage to your credit report.
4. If you’re refused credit, don’t keep on applying. Normally, lenders can see when you’ve applied for credit, and it looks bad if you apply multiple times in a short period. Leave it a while, and find a lender who’s likely to say ‘yes’ to someone in your situation.
5. Get your credit report and check for mistakes. You can get a copy of your report for £2. If there’s anything inaccurate in it, you have the right to get it corrected.
6. Clear up any problems you can. The sooner you pay back what you owe (whether it’s arrears or a CCJ (County Court Judgment)), the sooner you can have these problems marked ‘satisfied’. They won’t disappear from your report, but lenders will see that you’ve dealt with them.
7. Never ignore your bills. Paying certain bills late will damage your credit rating.
8. Talk to your creditors if you can’t make your repayments. Don’t wait for them to call you. Contact them. This could persuade them not to register adverse information on your credit rating – and you might be surprised how much they can do to help you repay what you owe at a reasonable rate.
9. If you’re in trouble, talk to an expert a.s.a.p. Don’t wait for your debt problems to get worse. If you’re in financial trouble, talk to a debt specialist as soon as you can – maybe all you need is some advice.
10. If necessary, get debt help. Debt management plans, debt consolidation loans, IVAs (Individual Voluntary Arrangements), remortgages… whatever your financial situation, the right debt specialist should be able to help you find the right debt solution.

It`s not just about credit
Remember: your credit rating shows how healthy your finances are. These tips won’t `just` help you look after your credit rating – they should help you keep your finances in good shape too.

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