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Debunking the myths of poor financial histories and credit scores

Philip Bacon

Updated: Jul 24, 2023

So you’re probably wondering why does a poor financial history or bad credit score stop you from securing finance? Lenders assess your ability to repay the amount you borrow by using your financial history and credit score.


In this blog, we are going to take a deep dive and debunk all the myths associated with it and what you can do about it.


1. If you’ve never been in debt, you’ll have a great credit score.


This isn’t actually true because you’ll never have been able to prove you can repay your credit in full and on time. You can rectify this by securing a credit card and placing necessary purchases that you can pay off each month.


2. Your credit score will always stay the same.


Again this isn’t entirely true. Any changes in your financial situation or change of address can impact your credit score. Depending on your credit score, you can take steps to improve it. Using apps like clear score will tell you directly what you should be looking to improve.


3. It makes no difference if you pay off your credit card in full.


This is wrong. You’re proving to the lender that you have the ability to repay the amount you have borrowed which can have a big impact on your credit score. Lenders offer the best deals to borrowers who can repay their credit.


4. If you always pay your bills, it doesn’t matter how many business credit cards you have.


This is also incorrect. Lenders love to see different types of finances not just credit cards. Not only that, the minimum amount you repay on a credit card will add up with each credit card and with interest added on top depending on your agreement with the individual lender. Talk to us at Knights Row to give you a rundown on what you could do to improve your finances and consolidate the debt to reduce interest.


5. You’ll be put on a credit blacklist if you have a low credit score.


This isn’t technically correct either. Lenders can review your credit history and decide whether to charge you more interest for borrowing if you have a low credit score. Decisions are not permanent so a soft search on your credit history will only apply during the initial stages of application but information on your financial history will stay on your report for up to 6 years. Using finance brokers like us will enable access to a network of lenders to get you the best deal for your business, regardless.


6. If you’ve got lots of money your credit score will be great!


You’ve heard it by now but unless you’re proving to lenders that you can borrow and repay on time then you will not have built a financial history report for them to utilise. However, assets and savings do not appear on your credit score report. The only way to prove you have the cash is to pay off your bill on time.


Your credit score can still be low regardless of how much wealth you have.


7. A family member’s bankruptcy will bring your credit score down.


Your credit score is an individual assessment however it can be impacted by a financial connection. Living with someone is not a financial connection.


8. Lenders only care about the applicant's credit history.


This isn’t strictly true. Lenders may look at your financial connections as well as your credit score. (Your financial connections do not impact the decision.) A financial connection is someone you share a bank account or credit with.


You can request to have information removed regarding financial connections, such as mortgages due to divorce but evidence is required for the couple to prove they have not been living together for more than 6 months.


9. There is nothing you can do about a poor credit score and securing finance.


Every lender has different criteria, without speaking to an advisor you could be losing out on securing finance even with a lower interest rate despite your credit score. Keeping track of your credit score is a good place to start before your credit history becomes poor.


Having frequent access to your credit score will ensure you always know where it is currently and what drives the changes to your score.


Struggling to secure finance?


If you’re struggling to find the right finance for your business, get in touch with us today! We have exclusive access to a wide network of lenders, enabling you to secure your finance regardless of your current position. We aim to work with you to find the right finance option as well as looking to improve your current position.

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We are a credit broker not a lender. 

 

Knights Row Commercial Finance Limited is an Appointed Representative of Optimum ELITE which is a trading name of Optimum Commercial Solutions Ltd, registered in England and Wales 09518480. Optimum Commercial Solutions Ltd is authorised and regulated by the Financial Conduct Authority FRN: 808754. Knights Row Commercial Finance Limited, is registered at Jason Works, Clarence Street, Loughborough, England, LE11 1DX . Company Register number is 15536510. Our FCA registration number is 1011729. You can check via www.register.fca.org. We are registered with the ICO, ZB667161 and you can check via www.ico.org.uk.


We conduct both regulated and unregulated business and therefore not all products provided through us are regulated by the Financial Conduct Authority. We may receive a commission from the Lender that will vary depending on the lender, product or other permissible factors. The nature of any commission model will be confirmed to you before you proceed. Our aim is to provide you with a professional and efficient service. However, there may be occasions where you feel this has not been achieved and should you wish to make a complaint about any aspect of the service we provide to you, you can do this by writing to Knights Row Commercial Finance Limited, is registered at Jason Works, Clarence Street, Loughborough, England, LE11 1DX, or by telephoning us on 0333 339 5905 where we will try to resolve your concern at the earliest time possible.

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