Credit Rating After Bankruptcy

Your credit rating is nothing more than a number that predicts the probability that any credit granted to you will be repaid. When you apply for credit, a lender will compare your credit rating to their cut-off point. If your rating falls below their cut-off point, they will consider you too risky and will refuse to grant you credit.

Why should I repair my credit rating?

Like most people in life, you will almost certainly need credit in the future. You may want a mobile phone, insurance, a car and or want your own house. Unless you have thousands of pounds in a bank account, which is very unlikely after bankruptcy, you will need a loan, a mortgage or other kind of finance.

If you are going through bankruptcy, or are a discharged bankrupt, then your credit rating will be low. Therefore, you will need to improve your credit rating to avoid high fees and high interest charges. It's important to start early, as increasing your credit rating will take time. It may take years!

How is Your Credit Rating Calculated?

Contrary to common belief, your credit rating is not something that just exists. Equally, it is not derived at a credit reference agency. It is the lender you are applying to that calculates it.

A credit scorecard will be used to calculate your credit rating. The scorecard shows how many points you should be awarded for each piece of information that:

• You provide them with
• They hold about you
• They obtain from other organisations such as a credit reference agency

Each piece of information is weighted differently. For example, bankruptcy will carry a much more negative weighting than a single payment missed 5 years ago.

How does bankruptcy affect your credit rating?

Unfortunately, bankruptcy is looked upon very negatively by most lenders which means they will assign you a poor rating.

Fortunately, there a specialist group of finance companies called "sub prime lenders" that specialise in lending to people with bad credit. These companies have a cut off point lower than your traditional high street lender.

How can I Improve my Credit Rating?

To improve your credit rating you will need to repair your credit. Go to the credit repair after bankruptcy page for more information.