Surviving a Financial Nightmare

by : LizaMathers

We all need credit to survive in today's society, it turns the wheels of our economy and, used properly, credit is a great asset. Most of us have loans, or other types of credit, which can be managed without difficulty.

But debt becomes a very real and serious problem when people cannot afford the repayments and, when used to excess it can create problems that spoil lives for years to come.

Falling unemployment, rising earning and low base rates have combined to encourage people to take on more debt. The UK National Association of Citizen's Advice Bureaux (NACAB) says its centres have seen a 46% increase in the number of consumers with debt problem during the past five years.

A temporary lapse in financial good sense can leave a lasting impression on your creditworthiness. Loan defaults and County Court Judgements (CCJs) stay on the files of credit reference agencies for six years (unless you pay it off within the first month). Many find themselves in a Catch-22 situation.

They have sorted out their finances, but can't get credit because of a past financial record. And until they get a credit card, they can't build up a new 'clean' credit history.

Being turned down for a credit or store card can be embarrassing. Whilst being turned down for a mortgage can be devastating if you have saved hard and are desperate to buy a home.

The first thing a lender does when considering you for a credit card, loan or mortgage, is to check your file and the main reason for refusal is a poor credit rating. Credit information on millions of UK adults is stored by credit rating agencies and loan providers check out this information, which includes details of unpaid bills, CCJs and any previous applications for credit.

Lenders often operate credit-scoring systems to allocate points to the information on your file along with your application form, such as your age, job and whether you are a homeowner.

No matter what your credit or debt history, even if you are blacklisted by banks, you can often still borrow what you need, save what you can, and solve your money problem.

It is possible to repair your credit status without being evasive or by using the services or dodgy credit repair companies - which can charge anything up to ?200 for doing nothing you can't do yourself through credit reference agencies.

Don't just go from lender to lender hoping to be accepted. Every time a check is made with credit reference agency it shows up on your file, leaving a trail of evidence showing you are being refused by others.

If you are refused credit, always ask why. It might be to do with their scoring procedures. Different lenders use different system, so you may find you can get a loan or credit elsewhere.

Minimize the risks and efficiently use your resources to fulfill your financial goals by doing a finance comparison for each step of your personal finance management.