Get to grips with all those tricky terms people use when they talk about ‘bad credit’.
Credit is one of the most misunderstood areas of finance for people and often bad credit is thought of as being even more confusing. But between this vocab list and our companion guide to bad credit, that doesn’t have to be the case.
Arrears means overdue debt. For example, if you’re paying back £15 a week for 10 weeks on a £150 loan and miss one week, you are £15 in arrears. This means the following week, you will have to pay £30 to cover the £15 you missed and the £15 you owe for that week.
Bad credit is a term used to describe a poor credit score. Your credit score is a review of your previous borrowing and how well you have repaid it. If you have not repaid your credit on time, then your score may be low and companies may be less willing to provide types of credit, such as loans and credit cards.
County Court Judgement (CCJ)
This is an order from a county court, formally stating that you owe money. This happens when a creditor tells a court you’re in debt to them and haven’t paid the money. A CCJ will show on your credit history and may affect your chances of getting credit with some lenders.
A record of your CCJ will stay on the Register for Judgments, Orders and Fines for six years.
This is typically completed when you apply for any kind of credit, and involves accessing your credit history with other creditors. This is a way for the lender to measure the risk of lending to you. They use this to decide whether you can afford to borrow the amount offered and if you’re likely to repay the amount borrowed.
The same as a credit report. For a definition, see credit report below.
A creditor is a person or business that is owed money. In the case of you borrowing money, a company providing loans is your creditor because it is owed money by you.
See credit score below.
Credit Reference Agency (CRA)
A credit reference agency collects information on everyone in the UK relating to their credit arrangements. It then provides this information to banks, building societies and other lenders. The data is collected from banks and lenders, as they all share information about their customers. There are three credit reference agencies: Experian, Equifax, and Call Credit.
A credit report is a report of your personal credit history. It includes detailed credit information like late payments, credit accounts, loans and recent enquiries and whether you have paid credit accounts off in full each month.
Lenders can look at your credit report and use this information when offering you credit. Lenders can only look at your credit report if they have permission to do so.
A credit score is just a measure of risk. It’s used by credit lenders to decide whether you can afford to borrow the amount they’re offering or if you’re likely to repay. Some factors that damage your credit score include late payment and unfavourable credit card use.
This is a person or business that owes money. If you take out a loan, you’re in debt (or a debtor) to whoever has lent you the money.
Income support is a type of government payment you might be entitled to if your income is low or you have no money coming in at all. Receiving it could affect your chances of getting credit from some sources – although it doesn’t discount you from getting a loan with Provident.
Missing a Repayment
When it comes to loans, missing a repayment means not contributing toward the amount you owe when you said you would, resulting in arrears. With some loans companies, that could mean being charged a fee and your credit file being updated to reflect that you’ve missed this payment.
If you have a Provident loan and you miss a payment, we don’t charge late fees. Instead, we speak to you about your options.
If you have a loan with Provident and you’re unable to make repayments, we understand. You must firstly contact your Agent, who will be able to help you get your repayments back on track and talk you through your options. For more information, click here.
Personal Independence Payment (PIP)
A Personal Independence Payment (PIP) is a type of disability benefit that’s intended to help people who may struggle with getting around and carrying out daily tasks. Receiving it may affect someone’s chances of getting a loan from certain providers. However, Provident will consider their application.
Repossession is when a lender takes something belonging to someone who owes them money, usually with a court order. The idea is to sell that item to get back some or all of the money which hasn’t been repaid. It can only be done if the loan was ‘secured’ against something, like a house or car, when it was taken out.