Many More Hurdles to Jump Before You Get a Loan

Credit scores are of overriding importance when you're in the middle of a banking crisis. As loans become harder to acquire and also more expensive, you cannot afford to have unpaid bills and missed repayments on the records held by companies like Experian. A low score means that you will find it difficult to obtain a loan for a house or a car. On the other hand, a high score will ensure you get the few cheap loans still available.

It only needs a lapse on a mortgage or card repayment, or even worse a missed loan repayment, and you will have damaged your credit rating. However, there are many other, far more tenuous ways that your credit rating can take a hit - many of which you will not be aware of. Following years of irresponsible lending, banks are scrutinising customers records to uncover any signs of financial stress. At the merest hint of difficulty they will cut off credit to protect themselves from the risk of bad debt.

Neil Munroe from credit reference agency Equifax says that factors, which in the past would have been ignored, are now being taken into consideration when looking at a person's credit worthiness. Minor things like forgetting to pay a catalogue or mobile phone bill will be reported back to the credit reference agencies. These petty misdemeanours will be recorded on your files.

Lots of people are unaware of the implications of their actions in the long term, says Darryl Bowman, who is with Experian, one of the big three credit agencies, along with Equifax and Callcredit. You need to make yourself an attractive proposition to banks, as they will only lend to those whom they are sure will pay them back, he adds.

There are a number of practical steps you can take to stop your score deteriorating. You should pay off your monthly credit card bills promptly, which will enable you to build up a good credit record. The spending limits on existing cards should be reduced where practical and cards which you don't use should be cut up. Unfortunately for credit and store card holders even unused cards will appear on their records. Potential lenders look at all of the cards you hold and consider that they represent an opportunity to run up debt in the future.

Your credit score will also be hit if you apply for credit for a number of items from different suppliers, each requiring a separate credit check. Typical examples would be a mobile phone, a new car or a satellite television. Alarm bells will ring with lenders as every search will leave a black mark on your file. Normally a large number of credit applications within a short time may be considered as an indication of financial weakness. Although your credit application may not be rejected, the lender may then look more closely at your financial history.

The common practice of switching credit cards to take advantage of zero per cent introductory offers will impact on your credit score. Although you may not have defaulted, it will make the lender suspicious. However it is much more serious to default on utility bilsl and council tax payments.

The ultimate transgression is receiving a county court judgement or becoming bankrupt. They remain on your record for six years and will almost certainly mean that you won't be accepted for a loan or any product which needs a credit check.

Although there are companies in the marketplace who offer to 'repair' your credit rating, it is impossible to have a CCJ removed unless it has been put there in error.

Credit reference agencies let people put personal statements on their records detailing mitigating circumstances in relation to their bankruptcy or CCJ. Payment of outstanding debts can also be recorded on your files, which may lead to a lender looking on your application more favourably.