What is Bad Credit?
Also
referred to as -
Poor
credit
Adverse credit
Sub
prime credit
The term 'bad credit' (and
similar terms noted above) is nothing more than a label
people use to describe peoples circumstances where they
have missed payments or are in financial difficulties.
Bad
credit, as far as mortgage applicants are concerned, refers to
a debtor
(the borrower)
who is unable to maintain their financial credit agreements,
and who's credit history therefore becomes less than
ideal
- which, if not rectified
can lead to defaults, court action, CCJ's or
worse. All this will be registered on the debtors
credit file, which is what lenders consider when
deciding whether to lend you money. Having 'bad credit'
doesn't necessarily mean you won't be able to borrow,
but you may find it more difficult because of your
credit history. We have listed information below regarding
the 2 main 'bad credit' obstacles we come across, namely
default's and CCJ's
Default
Default’ is a term used to
describe a credit account where the relationship between
you and the lender has broken down. This occurs when the
account is in serious arrears. At some point whilst the
account is in arrears (most lenders make this decision
on a case by case basis) the lender may issue a Default
Notice, formally requesting that the arrears are repaid
or in some cases the full outstanding balance of the
account. The lender should give you 28 days to comply
with this request. If you do not comply with the Default
Notice within the required timescale, the lender may
start legal proceedings to recover the debt and may
register a Default with the credit reference agencies.
Unlike a CCJ, you can not
remove a default notice without the creditors consent.
County Court Claim -
what's it for?
Someone you owe money to (a
'creditor') can take a County Court action against you
to claim the money. If you pay the amount outstanding,
you can avoid a hearing or judgment. If not, there'll be
a simple court hearing in private. You can attend if you
wish, or just send the information the court asks for by
post.
The court doesn't find anyone 'guilty' or 'innocent'. It
looks at the facts and decides whether you owe any
money, and if so, how you should repay it.
The court will send you a
'Claim Form', showing how much the creditor says you owe
them, and the details of the claim (though these details
can be sent separately up to 14 days later). This form
gives you the opportunity to explain your situation to
the court.
Please note:
Under Scottish law claims
are dealt differently - by the Sheriff Court
Replying to a Claim Form
You'll receive an Admission Form with the Claim
Form, asking you about your income and outgoings. On the
form you can make an offer to repay the debt (or a lower
amount if you think you owe less than the creditor
claims).
If you don't make an offer and the court decides against
you, it may say you must pay either the full amount in
one payment or
by monthly instalments.
You have 16 days from the date of the postmark to send
the form back to the court. Or you can submit an
'Acknowledgement of Service' or a 'Defence Form',
depending on how you want to proceed - follow the link
below to find out more about these forms.
County Court Judgement -
(CCJ)
After the court hearing, the
court may issue an order saying you must repay the debt.
This order is called a CCJ and will either be for the
amount agreed between you and your creditor or, if you
can't agree, a payment set by the court.
If you have judgments from more than one creditor, the
court can combine your debts and make an 'administration
order' - saying you must make a single payment every
month to be shared by all your creditors.
Who do I pay?
You pay the creditor who made the claim against you,
or their solicitor or representative who will accept
your payments on their behalf.
paying my judgment - what do I do?
(PDF -opens new window)
What to do if you can't
pay
If you pay nothing, or don't keep up with the
payments, the creditor can ask the court to take steps
to make you pay, in which case you may have to pay more
costs. If you genuinely can't pay, even in stages, you
can ask the court to:
information about what to do if
you can't pay ( PDF - opens new window)
for more on
credit reference
agencies and your credit file click here
Baker Financial deal with
every lender that could help
- contact us today
you may also
be interested in
about credit
reference agencies
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