What's adverse credit?

Adverse credit is a record of any poor repayment on credit cards or loan types. 

This record will appear on your credit report, with the tendency to lower the overall score. With a lower score comes greater difficulty in getting approved for loans, mortgages, and other types of credit. 

Keep reading for more information on how adverse credit works, how it can affect you, and how to turn it around with the help of our SIM-only credit-building mobile phone contracts. 

What causes adverse credit? 

Many people think that only serious events can impact your credit score, but even one missed payment can stay with you and affect your financial future. 

Causes of adverse credit include: 

• Missed or late payments

• Failing to repay loans as agreed

• Bankruptcy or Individual Voluntary Arrangements (IVAs)

• County Court Judgements (CCJs) for unpaid debts 

• Excessive credit utilisation 

• High levels of debt 

This negative credit history suggests to lenders you struggle to manage your budget and repay loans on time and in full, flagging you as a high-risk individual. 

In your credit file, it will be reported as: 

• Missed payments - which are reported by lenders and visible to other lenders 

• Defaults or bankruptcies - events like these can remain on your report for up to 6 years 

• Impacted credit score - you may notice a dip in your score if adverse credit is reported. 

The effects of adverse credit 

It can be much more difficult to get approved for loans, credit cards, and mortgages if you have adverse credit on your report. 

Here’s what you could experience if you have adverse credit: 

High interest rates 

On the off chance you get accepted for a new loan or credit agreement, it will come with higher interest rates to compensate for the increased risk. 

Limited borrowing rates 

Popular lenders are likely to decline your application if you have missed payments, CCJs, or high levels of debt linked to your account. In this instance, you’ll notice limited borrowing options with less favourable terms. 

Larger deposits needed

For loan agreements aimed at those with poor or adverse credit, larger deposits or guarantees are needed in order to be approved. 

How long does adverse credit last?

While there’s no doubt that adverse credit affects your score and ability to be approved for credit types and loans, the length of time it stays on your report varies. 

Recorded defaults, CCJs, and bankruptcies will stay on your credit file for up to six years from the date they were added. 

Missed or late payments will also stick around for up to six years, but the impact they have on your report will lessen over time if you display and maintain responsible financial habits. 

How to improve adverse credit 

So, you’ve displayed examples of adverse credit, and your credit score is likely to have taken a hit. 

But don’t worry - there are multiple ways of improving your credit score. Some offer a quick boost, while others increase your score over time, helping you to rebuild trust and make lenders recognise your dedication to improving your report. 

Here are the most impactful ways to improve your score: 

Pay off debt 

If there’s any remaining debt on your account, make sure to pay it off in full and on time. Set up reminders and prioritise your credit types to demonstrate financial responsibility. 

Understand your credit file 

By getting to know your credit report, you can be sure any examples of adverse credit are correct and payments are up to date. If you notice any errors, report them and request for them to be removed from your account as soon as possible to limit further damage to your report. 

Avoid applying for any more credit 

Applying for credit means a hard credit check will be done on your report. Too many of these suggest you’re reliant on borrowed money, bringing your score down even further. 

Consider Boshhh - The credit-building mobile phone network 

With no credit checks and guaranteed acceptance, our SIM-only deals are created to improve your score, while giving you access to the UK's leading network provider. 

By making regular payments to us, you can demonstrate dedication to improving your report. We also provide credit-building tips and credit reporting on our easy-to-use app, so you can learn how to boost your score further. 

If you have adverse credit and are struggling to build your report back up, get started with Boshhh and enjoy the perks that come with a guaranteed phone contract with bad credit.