When you apply for credit, lenders aim to verify two things:
- That you are who you say you are
- That you have a proven history of paying your bills on time
A poor credit score indicates that you can’t manage your money, which in turn means you’re a high-risk applicant.
The most common causes of bad credit are:
- Missed or late payments
- A default (a series of missed payments)
- County Court Judgment (CCJ)
- Debt Management Plan (DMP)
- Individual Voluntary Arrangement (IVA)
- Bankruptcy
Different things carry different weight. For example, missed mobile phone contract payments have less impact than missed mortgage payments.
If you’ve rarely, or never, had credit before, and so have no way of showing good financial management, that can also count against you.