Will I ever be able to obtain a credit card again?
Yes, is the short answer. There are basically two ways to repair your credit. On the practical level you can have an A-rated credit report within 2 years of even bankruptcy. Why? Because lenders are much more interested in your present circumstances than what happened to you 3 to 10 years ago. Rebuilding your credit can be done rather quickly through a systematic plan, and a little perseverance. Keep in mind that positive credit information stays on your credit report forever and negative information for six years, at the most.
The Easy Way
The first way, which is very simple and my personal favorite, which has worked well for me in the past, but it does take up to two years. Simply get a new bank account either a savings account or a 'basic' bank account. These accounts do not offer overdrafts, so are able to be opened with a poor credit rating. Keep a reasonable balance in the account and do not 'bounce' cheques or direct debits. Then after 6-12 months get a savings account with the same bank and keep as much as you can afford in there. Then apply for a credit card. If you get turned down for credit, send a letter to the lender, explaining why you are a better credit risk than your credit report indicates. But it is best to rebuild your credit before applying for credit again. Once you get one card and you pay the balance every month ON TIME, then that builds your credit score and you can then apply for more. Also, if you can, pay all your other bills on time so that utility companies do not upset your plans. Avoid taking out excessive credit. You should stick to one or two credit cards and one or two other major debts (car loan, mortgage) in order to have the best credit rating. Do not apply for every new credit line or credit card just in case. Borrow only when you need it and make sure to make payments on your debts on time. You should also know that taking out lots of new credit accounts in a relatively short period of time will cause your credit score to nosedive because it will look as though you are being financially irresponsible. In general, try to make sure that you use no more than 50% of your credit. That means that if your credit card has a limit of £5000, make sure that you pay it down to at least £2500 and work at carrying no larger balance. If possible, reduce the debt even more. If you can pay off your credit card in full each month, that is even better. What counts here is what percentage of your total credit limit you are using - the lower the better.
The Difficult Way
The more difficult way, for those who need credit in the near future is to challenge the information the Credit bureaus hold on you. Credit bureaus have huge databases on the credit histories of consumers. This information is gathered and given to the credit bureaus from creditors that have extended you credit in the past (for example, landlords, credit card companies, the HM Inland Revenue, department stores and banks). Your credit history contains information that creditors use to evaluate and determine your ability and willingness to repay credit. Typically, credit bureaus give the following information: Your open accounts, credit limits, current balances, number of late payments, collection actions, tax liens, and whether you own your own home or not. You can contact the credit bureaus and ask them to send you your credit report. They are:
Experian Consumer Help Service
PO Box 8000
Tel: 0115 941 0888
Credit Advice Centre
PO Box 1140
Tel: 08705 143700
Consumer Services Team
PO Box 491
Tel: 0870 060 1414
* They cost - £2.00. You can usually get a free introductory report, but information is usually limited.
You can challenge your credit rating on a number of areas. You can show them the tacit contract demonstrating that the debt was never verified if you have sent the three letters to your creditor.
Challenging your credit entries can be effective because the credit bureaus are often too busy to re-verify the item you challenged within the time limit and therefore will remove it. Also, because of human error, correct information can be inadvertently deleted. After two or three years a closed or inactive file is often stored offsite by your old lenders, so they cannot access it and as a result they do not respond to the credit bureau because it is too much work. If the negative item challenged gets confirmed by the lender, they will not be remove it from your credit file. Wait 1 to 6 months and try again, with a written challenge. It's a legal obligation for the credit reference agencies to deal with every query raised. You should challenge each item separately, in writing only. Don't pick up the phone and call the credit bureau.
You have to be patient when dealing with the credit bureaus. Deal with each item one at a time. Wait until one item is resolved before challenging another. You have to provide the following: your full name, DOB, your current address, your previous addresses over the past six years, and your signature. There are basically eight things that look bad on your credit report. Some common examples are: multiple searches, late payments, defaults(paid/unpaid), CCJ's, bankruptcies and repossession orders. All negative information stays on your credit file for anywhere between 1-6 years.
How does a lender qualify me for credit?
Most lenders look at the number of years you have worked at your present job, the kind of work you do (the worst to best being: manual work, clerical, self-employed, managerial, professional), the number and nature of negative entries in your credit report, the amount of credit you currently have, savings and or current accounts with the lender, length of time at your present address, is the telephone in your own name, do you own your home. If you get turned down for credit, send a letter to the lender, explaining why you are a better credit risk than your credit report indicates. But it is best to rebuild your credit before applying for credit again. Once you have cleared your negative remarks on your history, you can then use the techniques in 'The Easy Way'; to build a positive credit history.