If you have been refused loans or finance because you have a history of bad credit, read on.

Just because you have a bad credit history, it is not the end of the world when it comes to getting a loan. It is a little more difficult than just walking into a high street bank, but nonetheless, it can be relatively straightforward.

First of all, if you have been refused a loan or credit, you need to understand why your application failed. Applications fail for a variety of reasons, and not just because of a bad credit history. Self employed people or company directors who take most of their payment in dividends as opposed to a regular salary can be refused finance by many lenders. If applying for an unsecured loan, employment history and residential history are key factors in determining whether or not you get approved for the loan, not just your credit status. You may have never missed a payment in your life, but because your employment history is sketchy or you have moved around a lot in recent times, your chance of getting turned down for the loan is quite high.

If you are dealing directly with a lender, a little gentle questioning of the call centre or loan office may get you a few pointers as to why you were unsuccessful in your application. Realistically, most people know whether or not they have missed payments on their existing loans or credit cards or are in arrears with their mortgage, or if they have changed jobs frequently so it should not be too difficult to point the questions in the right direction to back up your hunch as to why it failed. If you are dealing with a reputable finance broker, they will normally be able to shed more light on why the application failed.

If you still have no idea as to why the application failed, or you have been given a hint that there may be some bad credit lurking in the past, the first thing you need to do now is get hold of your credit file or credit report from the relevant credit reference agency. This is quite easy to do and can now even be done online. You need to do this to establish the level of poor credit you have. More importantly, you need to establish that there is no erroneous information held against you that has been recorded by mistake. Please be aware that there is no such thing as a credit blacklist. If there is incorrect information on your credit file, you can ask to have it removed

There are two main Credit Reference Agencies in the UK.
Experian
Consumer Help Service
PO Box 8000
Nottingham
NG1 5GX

Tel: 0870 241 6212

www.experian.co.uk

Equifax plc
Credit Advice Centre
PO Box 1140
Bradford
BD1 5US

Tel: 08705 143 700

www.equifax.co.uk

To get your credit file, you need to write to each Company with a cheque made out to them for £2. They will not allow you to order your file over the telephone, nor will they discuss it with you. You will need to provide your full name, your date of birth, your current address and any previous addresses over the past 6 years.
One thing to bear in mind is that Credit Reference Agencies associate you with other members of your family with the same surname and address. Your Credit Score could be affected by this. You may ask the Credit Reference Agency for a 'Disassociation.'

You will need to get both as not all lenders subscribe to the same agency.

Once you have established that the information on your credit file is correct and that you do have a certain element of bad credit, the next thing to do is to find a finance broker who is experienced in getting loans for people with bad credit. They will have lenders on their panel that are sympathetic to people who have had credit problems previously and are willing to lend to them. Be mindful that if you have had problems in the past you are not going to get the best interest rate advertised! Having said that, rates have not been too bad recently, even with quite troublesome credit histories.

Having found a broker that can provide bad credit loans, when going through the application, let the loan officer know what you have found out. This will assist them greatly in getting your application placed with the Lender most likely to lend to you. One thing to bear in mind is that if you are a homeowner, you will have a much greater chance of getting a loan than if you are a tenant. You will probably have to get a secured loan, but this means that you will get what you are after and at a reasonable rate.

Don't be tempted to shop around different brokers. They all have access to the same lenders. There are only about a dozen or so lenders in the industry, and they all derive their business from brokers. Having multiple credit searches done in a short space of time will not do you any favours.

Unless you have a serious bad credit history or are a bankrupt, following these steps should put you on course to getting the loan that you are seeking.

More information on bad credit loans

If you are getting out of your depth with the number of credit cards or store cards that you have, see my other lens about debt consolidation.