Failing to Give Credit Where It’s Due

19 May 2012

It won't have escaped anyone's notice that banks are lending less and less at the moment - and it's having a detrimental effect on people, businesses and the property market.

A report in the North East last week claimed that mortgage lending is at a record low and house prices are continuing to drop - they are now down 1.1 per cent on this time last year - as banks tightened up their lending procedures in a bid to promote responsible lending.

While this is thoroughly commendable as a way of reducing levels of uncontrollable debt, it is also marginalising those sensible borrowers who need credit and have the means to pay back their debts.

As a result, responsible borrowers who may only have a minor issue - such as one late payment - on their credit rating are being refused, forcing them to consider taking on loans with increasingly high rates of interest, pay day loans or even illegal money lenders.

However, there are ways of improving a personal credit rating in ways that will entitle a borrower to access competitive interest rates. Whether its problems with debt or an inability to access essential credit, the best way to deal with financial problems is to tackle them head-on - nothing was ever solved by burying heads in the sand.

Just as it is a good idea to have regular health checks, keeping a close eye on your credit history is almost essential if you have any plans to apply for a loan or mortgage in the near future.

Using a person's credit record to check whether or not they are eligible for borrowing - and to calculate how much that borrowing will cost them - is not a new thing. Banks have been doing it to some degree for years to attempt to prevent people borrowing beyond their means, which is perfectly sensible - and it was, of course, irresponsible lending that contributed to the recession.

Most credit report companies offer a free month's trial with no obligation (but don't forget to cancel after the first month) so it's worth signing up just to see what is stored on your credit history - and what is being held against you.

It's not just County Court Judgements or bankruptcy that are considered to be black marks - lenders will consider previous and current debts, missed payments, current access to credit, the number of credit cards you have... the list is staggering.

People struggling with debt, or with poor credit ratings, shouldn't turn to high-interest lenders to fix the issue - this is never the answer and will only make the situation worse, often plunging the borrower deeper into debt.

Alternatively, there are facilities such as Credit Unions which offer affordable lending rates to members with flexible repayment terms and aim to help members take control of their money by encouraging them to save what they can, and borrow only what they can afford to repay.

Northumberland residents concerned about poor credit ratings or debt problems should contact DAWN Advice through the county's dedicated advice line on 0844 4111 309.