What is adverse credit?

If you’ve had issues getting a loan or noticed a dip in your credit score, you might have what’s known as ‘adverse credit’ – which is basically another term for bad credit.

If you’re in this situation and you have adverse credit, you might have questions and concerns about your finances. We’re here to help explain what adverse credit is, how it affects your chances of getting a loan, and what you can do about it – helping you to work towards a more financially healthy future.

In this guide:

• What is adverse credit?
• How can I tell if I have adverse credit?
• The effects of adverse credit
• How long does adverse credit last?
• Can I get a loan if I’ve got adverse credit?
• Can I still get a mortgage with adverse credit?
• Moneyboat’s top tips for improving adverse credit

What is adverse credit?

Adverse credit means that your credit history has a record of poor repayment or late repayments, or other negative signals. This could be on a loan, credit card, or any other credit product like a mobile phone contract. It might also mean that you’ve had a CCJ or a default at some point, which is still on your file and affecting your overall credit.

Adverse credit suggests to lenders that you might have had difficulty repaying your debts or had issues with debt management in the past, which may make it trickier for you to get more credit in future.

Why you might have adverse credit

It’s not only late or failed repayments which can negatively impact your credit score. Adverse credit can also be triggered by factors such as bankruptcies or too many credit applications. Our guide on how applying for loans affects your credit score has a lot more detail on this for you.

There’s also the possibility of fraudulent activity or mistakes on your report which can cause bad credit, so it’s important to always be aware of any changes to your score. Equally, you may have a weak score if you don’t have a substantial enough credit history. So, it’s just as important to put effort into building one.

How can I tell if I have adverse credit?

To find out whether you have adverse credit, you’ll have to gain access to your annual credit report. You can do so by checking with one of the three main credit reference agencies:

• Experian
• Equifax
• TransUnion

If you notice that your credit score is deemed ‘poor’ or ‘very poor’, you likely have adverse credit. You can also check your score with your credit card lender as many issuers give borrowers a free score check.

The effects of adverse credit

Next, let’s look at some of the effects of adverse credit. With a negatively impacted credit score, it will be much more difficult to secure loans, credit cards, and even mortgages.

Adverse credit doesn’t only make home ownership more difficult, but it might also be more challenging to rent a property. Landlords will check your credit score to make sure you’re a reliable tenant and can make prompt payments. If they have doubts, they may ask you to put down a larger deposit or make higher monthly payments.

Equally, taking out a phone contract or getting car finance may be more challenging with adverse credit. With car finance, there’s a possibility you’ll be charged a higher interest rate for instance.

How long does adverse credit last?

Most information about your credit history is visible on your credit file for six years (increasing to ten years in the circumstance of bankruptcy).

If you miss a payment on a loan or a credit card, that fact will remain on your credit file for six years – but you can still improve your credit score over time even if this has happened to you.

Can I get a loan if I’ve got adverse credit?

Even if you’ve had difficulties with credit or debt in the past, that doesn’t mean that you might not need a loan in the future. That’s where adverse credit loans come in.

It can be more challenging to secure a loan with adverse credit, but it’s not impossible.  Responsible direct loan lenders like Moneyboat will conduct a credit and affordability check as part of your application process, so we can see if you’re able to pay back the money we offer. Find out more about how credit checks work with our guide.

Even if you have poor or adverse credit and have been refused loans elsewhere, that doesn’t mean that you are ineligible for a Moneyboat short-term loan. To ensure you don’t wind up in a worse financial predicament, take a few moments to read our payday loan eligibility and criteria guide.

Can I still get a mortgage with adverse credit?

Having debt doesn’t automatically prevent you from getting a mortgage. If you’re managing your repayments responsibly, paying on time and in full, with no defaults, then you may still be eligible.

However, responsible lenders will assess your overall affordability on a case-by-case basis. If your existing loans and other expenses suggest that a mortgage would stretch your finances too much, they may decline your application or not be able to lend you the full amount you’re looking for.

Moneyboat’s top tips for improving adverse credit

It’s more than possible to reverse bad credit and avoid any future negative marks, while also improving your credit score. So, if you’re wondering how to improve your credit worthiness and remove adverse accounts from your report, here are some top tips to help you.

• Work towards reducing current debts: First things first, you should work towards paying off your debts by making regular repayments. Always pay your minimum payments promptly, and if you can, pay more than the minimum to get ahead.
• Keep an eye on your credit score: As mentioned, you should remain hypervigilant of your credit score. If it declines for any reason, you can then take the necessary steps towards improving it.
• Avoid opening too many accounts: Opening various accounts over a short period may further damage your credit score. So, always make sure to proceed with care and caution.

While results can take time, promptly paying your bills is one of the fastest and most effective ways to boost your credit score. It’s important to set a feasible budget, stick to it, and make sure you’re able to meet your payment deadlines.

Having an adverse credit history can have a negative impact on your finances. But, you shouldn’t feel defeated if your credit score needs some work. It’s never too late to improve your financial situation, and there’s always hope for a financially healthier future.

By equipping yourself with the necessary knowledge, and implementing new healthy habits, you’ll be able to take control of your finances and avoid any future adverse credit issues.

For more support on all things credit, take a look at our guide to finance jargon to help you demystify some of the terms used in the industry, or read our blog on what makes a good credit score so you know what to work towards in your financial future.

For independent advice about finance and debt, you can also reach out to third-party organisations such as Citizens Advice, StepChange and MoneyHelper.  

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