Summary

Nobody wants an adverse credit rating. So at what stage does your credit history change from being acceptable to being "adverse"? This article investigates.

Adverse Credit - When is a credit history labelled as being "adverse"?

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If you are a borrower

It's the credit agencies like Equifax and Experian which collate information about you and then process it. They are then legally entitled to sell the information to { life insurance } anyone with an authorised purpose as defined by Law. This includes banks, building societies, credit card companies, other lenders, landlords, employers, any government agency and anyone you have ordered a product or service.

And you'll be simply astounded what information the credit agencies hold about you!

A typical computer file will store your name, address, date of birth and social security number. It will also include your previous addresses, whether you are registered on the voters' roll, details of your current and previous employers. They also hold crucial information relating to { cheap life insurance } your monthly payments on your mortgage, hire purchase agreements, loans and any credit cards you have. Then their computers will store information from the public records. If you have any Court judgements in respect of your debts, then the details will all be on their files. The file is topped off with details of all the times you apply for credit.

All this data is gathered from two chief sources: the Public Records { insurance } offices and records supplied by financial institutions from throughout the UK. You can't escape their watchful eye. Quite honestly, the agencies are recording your credit history from the first day you show on their computer screens.

The credit agencies then sell this information to anyone to whom you've applied for credit. As part of their service, they'll also credit score your data. This enables your lender to make a statistical based decision whether to award you credit. So within this credit vetting process, your credit score becomes crucial.

Under credit scoring your credit history is statistically judged { bad credit loans } and awarded a number of scoring points. The more points you have, the better your credit rating. These points measure the probability that you will repay any credit provided to you. The system is based on the principle that it's possible to predict your future credit performance by examining your credit history and statistically comparing it with the performance of other applicants who have similar characteristics. The points score allocated to you then makes it possible for your prospective lender to calculate the level of risk in your application and lessen the element of subjectivity in their lending decision.

So now we revert to our first question - When is a credit history labelled as being "adverse"?

In practice it's not the credit agencies but the lender that decides. Each lender has it's own lending policy through which they define the level of credit risk which is acceptable to them. If your credit score reaches a certain level, then you 'pass' their credit screening. If you don't score sufficient points, the lender may either refuse your application or offer you a smaller sum than you had applied for or offer you a higher interest rate. The decision is always theirs - after all it is their money! But as lenders each have different lending policies, your credit score could be acceptable to one but not to another.

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