Bad Credit can be defined as someone who has;
• CCJ’s (County Court Judgements) registered against them
• Incurred Defaults
• Late Credit Card Payments
• Serious Arrears with a Loan or Mortgage
• Been forced into Repossession
Many people find there are a victim of “bad credit history” and find it increasingly difficult to get themselves back on the road to “positive credit history”.
Here at Bad Credit Loans 4 You we aim to not only find you your bad credit loan, with the best APR to suit your circumstances but also to help you get back on the road to “positive credit history”.
There are a number of different terms that may confuse you when searching for your ideal bad credit loan. We have put together a number of pages on ‘how to sort your finances’, starting with ‘How to Get Your Credit Report’, to get you started on the road to “positive credit history”.
Our intention is to simplify the terms used so that you can gain a better understanding of your credit worthiness. Below we have a summary of the ‘Jargon’ used within the bad credit industry.
Jargon Buster
APR / Annual Percentage Rate / Interest
APR (Annual Percentage Rate) is the rate of interest that is charged by creditors on any amounts owing. APR is applied as the cost for the privilege of borrowing.
Arrears
Arrears is the term used when prearranged payments on an account become overdue. If one or more of the required payments become overdue an account is said to be ‘in arrears’. The amount of arrears is calculated by totalling what should have been paid in order to keep the account up to date.
Asset
An Asset is any item owned by an individual that has a monetary value, such as a house or car, that can converted into cash.
Bankruptcy
Normally the last resort, bankruptcy is a way of releasing yourself from mounting debts that you cannot afford to pay. Bankruptcy is a court order that declares you incapable of making prearranged payments with your creditors. Your creditors can take steps to force you into bankruptcy by approaching the court directly, or you can voluntarily apply to be made bankrupt.
CIFAS
The UK’s fraud prevention service CIFAS is a membership association that was developed to assist in the prevention of fraudulent activity. CIFAS intention is to protect innocent individuals whose identity is used fraudulently by others to obtain credit. A CIFAS warning recorded on a credit report merely indicates that additional checks need to be carried out to confirm the legitimacy of an application for credit.
Consolidation
With Debt Consolidation the aim is to obtain a cost effective loan that can be used to pay off existing unsecured debts that you owe. Ideally the loan would need to have a lower rate of interest than the interest charged by your current credit and store card providers, or would need to be paid over a longer period of time, to spread the cost.
The idea is that over the term of the loan you would save money on the costly interest rates that had been charged to you through your credit and store card providers. Essentially however, this would also reduce your monthly outgoings by giving you just one manageable monthly repayment.
County Court Judgements
If a company, or individual, has not been able to successfully retrieve debt owed to them they can choose to take the matter to court. A County Court Judgement, or CCJ, is a legal decision issued by a County Court to show that an individual has been taken to court to recover a monetary sum. The County Court can then order that payment be made, usually in monthly instalments.
Credit
Credit is a sum of money which is borrowed temporarily, through either a Credit Card or Loan, with the condition that the money is repaid at a later date. For the privilege of receiving credit upfront you will normally be charged interest.
Credit Agreement / Loan Agreement
This is a legally binding contract which outlines the rules and regulations between a creditor; who agrees to loan a set amount over a set period of time, and the consumer; who agrees to repay the loan, with the specified rate of interest, often in monthly instalments.
Credit History
Relates to the financial and public information registered on your credit report. It is a record of an individual’s past borrowing and repayment behaviour. The information is held by Credit Reference Agencies and is used to assist in a lenders decision if an application for credit is made.
Creditor
A Creditor is a person or organisation to which a debt is owed. Therefore, if you have a loan with your bank, the bank is your creditor.
Credit Rating / Credit Score
Your credit rating is designed to assist lenders in making their decision when you make an application for one of their products. Your credit rating is a numerical score that is based on your credit report and can be used to identify your credit worthiness. Your credit rating, or credit score, is calculated using the information supplied by a Credit Reference Agency on your credit report.
Credit Reference Agency / Credit Bureau
Is a company that gathers financial and public information relating to the borrowing and repayment history of an individual. The accumulated information is then used to provide a credit report and the credit rating of the individual to potential lenders if an application for credit is made.
Credit Worthiness
If you choose to apply for credit then a potential lender will assess your Credit Worthiness which is your ability to pay back the loan if it were agreed upon. The better your repayment history the more likely it is for credit to be extended to you, therefore making you more credit worthy.
Data Protection Act
In 1998 the Data Protection Act was passed to protect the rights of how an individual’s personal information is used, stored, and who the information is disclosed to. Specifically it allows an individual privacy by providing a way for individuals to control how their personal data is used.
Debt
Is the amount that is owed to a creditor.
Debt Management
Debt Management is where an individual finds that they are unable to repay unsecured debts that had been previously agreed upon and opt for a repayment strategy to be put into place to help manage their debt.
As the debtor is unable to manage their own debt, a Debt Management Company will assess the debtor’s circumstances, their income and expenditure, to determine the debtors disposable income if any. Then on behalf of the debtor the Debt Management Company re-negotiates payment terms and interest rates with the individual’s creditors directly. Usually the intention is to freeze the interest on debts owed.
A Debt Management Plan is a structured repayment scheme which is put into place to make the debtors monthly repayments affordable. With affordable monthly repayments the creditors are more likely to be able to collect payment.
Debtor
A Debtor, also known as a borrower, is a person or organisation that has an obligation to pay a debt that is owed to a Creditor.
Defaults
A default is issued when prearranged payments have not been made leaving an account in arrears. A default, or default notice, is a formal letter that is issued on behalf of a creditor to debtor. A default notice is a warning from a creditor that the terms of an agreement have been breached and that their intention is to recover the debt using legal action if you do not act in accordance with their requests. A default will usually be issued when your payments are 3 to 6 months in arrears.
Disposable Income
Your monthly disposable income can be easily calculated by deducting the total of all expenditure you make in a month from your total monthly income. Your disposable income is what you have available to spend after all your expenses have been taken into account.
Electoral Register / Electoral Roll
Is a list of all those that are eligible to vote. The Electoral Roll also assists in the prevention of fraud by helping to identify if an application for credit is genuine.
Financial Ombudsman Service
The aim of The Financial Ombudsman Service is to assist in the settlement of disputes between an individual and any company that provides a financial service. If deemed appropriate they can also choose to have one party provide the other with compensation.
GAIN - Gone Away Information Network
Is a membership association which allows Lenders to share information on individuals who have an account in arrears but have changed address without providing a forwarding address.
Identity Theft / Identity Fraud
Identity theft is the misuse of the identification of another person, without their knowledge or consent, usually to obtain a facility - such as a mobile phone, insurance, a loan or other financial product or service - by deception.
Individual Voluntary Arrangement ( IVA)
An Individual Voluntary Arrangement is an alternative for individuals wishing to avoid Bankruptcy. It is an agreement between an individual in considerable debt and their creditors. The debtor pays a set amount, usually the maximum that the debtor can afford after living expenses, every month over a set period of time.
At the end of the term, so providing that all agreed upon repayments have been made, the remaining debt can then be written off.
Joint Application
An application for credit that is made by two people, usually the main applicant and their spouse. If the application is approved both applicants become jointly responsible for payment of the debt.
Late Payments
If you fail to make a prearranged payment on an account by the date specified to you by your creditor, then this is described as a Late Payment. Be careful not to fall behind on your repayments as it is a breach of agreement and can lead to additional charges.
Loan Application
A Loan Application is a form that you need to complete in order to put forward a request for a loan. The form provides the lender with your requirements and the details they need in order to make a decision.
Loan Broker
A Loan Broker is a company or individual that acts as an intermediary between someone looking for a loan, and a potential creditor to provide the loan. Using a Loan Broker can have its advantages, especially if you have found it difficult to obtain a loan in the past, as they often have access to lenders that, as an individual searching for credit, you could not access elsewhere. A specialist Loan Broker can source a loan on your behalf by searching through a panel of lenders that a) you meet the criteria of, and b) will consider an application from an individual in less favourable circumstances.
Loan / Personal Loan / Unsecured Loan / Tenant Loan / Secured Loan
A Loan is a sum of money which is borrowed temporarily with the condition that the money is repaid at a later date. For the privilege of a Loan you will normally be charged interest. Usually monthly payments are made over a set period of time until the debt, inclusive of any interest incurred, is repaid.
A Personal Loan, also know as an Unsecured Loan or Tenant Loan, is where a lender has no entitlement to any of the borrower’s assets if the borrower fails to make the agreed upon repayments.
A Secured Loan is where the borrower provides the lender with security, normally by pledging their assets. Such a loan usually has the advantage of a lower interest rate as the borrowers assets can be sold, to recover any losses incurred by the lender, if the borrower is unable to keep up with the agreed upon repayments.
Loan Term
Loan Term is the length of time over which the borrower is required to repay their loan.
Monthly Repayments
Monthly Repayments is the amount that you repay each and every month over the entire Loan Term. It is calculated as the total amount owed, inclusive of any interest or charges, divided by the Loan Term.
Notice of Correction
A Notice of Correction is a statement that you can choose to have included on your credit report to explain an entry on it. This should be considered if you find there is information on your credit report that, although is factually correct, you believe gives a misleading impression of you.
Anyone that searches your credit report will have access to your Notice of Correction and must take this into consideration when you make an application for credit.
Net Income
Net Income is the amount you receive from your employer after the required deductions, such as Tax and National Insurance, have been made. Also know as the amount you ‘Take Home’.
Order of Discharge
An Order of Discharge is an official document that confirms an individual has been discharged from Bankruptcy. With the majority of bankruptcies, after a period of 12 months, the individual is automatically discharged. To be discharged means the individual would no longer be bound by the restrictions imposed by a bankruptcy order.
Public Record
Details regarding CCJs (County Court Judgements), Bankruptcies, IVAs (Individual Voluntary Arrangements), Repossession and the Electoral Roll are provided to Credit Reference Agencies by public sources. This information is documented under the Public Record section on your credit report.
Repossession
Repossession refers to a financial institution, usually a mortgage provider, who takes back possession of your home when used as collateral in a transaction. The property can then be sold on to recover any losses incurred by the lender who initiated the repossession order. This information is provided to Credit Reference Agencies and will remain on your Credit Report for 6 years from the date of Repossession.
Sequestration
Sequestration is the Scottish term for Bankruptcy.
Check out our New Press Release titled "A Guide to a Dilemma Free Wedding Day"
also well worth a look at is
Our Guide on "How to Avoid the Student Loan Debt Trap"
Practical down to earth advice on how to handle Student Debt
