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Adverse credit history explained

Learn what adverse credit history is, how long it lasts, and its potential impacts on your ability to borrow.

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04.09.24

Olivia

An adverse credit history is an unfavourable one. It usually means a credit report contains negative markers, such as late or defaulted payments, County Court Judgments (CCJs), or even a bankruptcy.

Let’s take a look at what it means in detail, the potential impact it can have, and how to find out if there are negative markers on your credit report.

What is an adverse credit history?

Your credit report is like a CV of your financial history. More specifically, it's a detailed record of your personal information, and your borrowing and repayment history. Lenders use this information to assess how likely you are to be able to repay any credit agreements they approve for you.

A credit report containing negative markers – such as late or missed payments, defaults, insolvencies or court judgments – is said to have an adverse credit history.

In short, it means you haven't kept up with your financial commitments in the past. But we know that life happens, and this could be a result of circumstances beyond your control, like a large unexpected bill, being made redundant or falling ill, for example.

What does an adverse credit history look like?

Lenders tend to update your credit account information monthly, and each account is labelled with a marker showing its status. Ideally, when viewing your credit report, you (and prospective lenders) want to see that payments for all your accounts have been made on time according to the terms of your credit agreement.

But if an account is not paid on time, a negative payment marker may end up on your credit report. These negative markers contribute to an adverse credit history.

Not all lenders report to all three of the credit reference agencies, Experian, Equifax and TransUnion (CRAs). So a Checkmyfile report can give you a better idea of what a prospective lender may see, as it includes information from all three main credit reference agencies in one place.

Payment markers to look out for

There are various payment markers you could find on your Checkmyfile report. While some are more neutral markers, like U (meaning Unclassified, for a newly opened account without any activity yet), there are others that lenders tend to view negatively:

Numbers 1-6: These markers appear in the form of numbers reflecting how many monthly payments have been missed, ranging from 1 for one missed payment to 6 for six or more missed payments.
AR: An arrangement to pay is when a lender agrees that the borrower may make payments of a different amount each month than what was originally agreed upon. This might be just for a short period of time or until the account is fully settled. This is listed as an AR on your credit report. This repayment marker may be viewed negatively by lenders because it suggests that the customer was unable to keep up with their original credit agreement.
D: If you miss payments over a prolonged period or break the terms of your credit agreement, a default (D) may be reported on your credit report. Before your account is defaulted, the lender will send a Default Notice to you and give 14 days to pay the outstanding balance. If left unsettled, a default will be added to your report and the debt may be passed onto a debt collection agency or they may start court proceedings against you. While some lenders may leave it as an outstanding debt, defaults are a serious negative marker. Unlike one missed payment, which lenders could accept as a temporary setback, a D signals to most lenders that lending to the borrower is highly risky.
DA: This marker stands for Debt Assigned, and means the account has been sold to a debt collector.

Other adverse credit history entries to be aware of

CCJ: A County Court Judgment (CCJ) is a court ruling enforcing debt repayment. If you fully pay the debt within one month of the CCJ being issued and a Satisfaction Certificate has been submitted to the court, the judgement will be ‘set aside’. This means the CCJ will be removed. But if you don't pay the debt within that time frame, a CCJ will remain on your credit report for six years.
Bankruptcy: Although people are usually released from bankruptcy restrictions and debts after 12 months, a bankruptcy will remain on your credit report for six years, as long as you’ve been discharged.
Repossession: If you’re unable to keep up with a secured credit agreement such as a mortgage or car finance, the lender in question could repossess your home or car, selling it off to recover the money that you owe. This is recorded on your credit report for a period of six years and can make it more difficult to get approved for other credit.

How long does adverse credit history last?

In general, you can expect evidence of adverse credit history to stay on your credit report for six years.

While this isn’t ideal, it’s encouraging to know that lenders are generally more interested in your recent borrowing history. This means the negative impact of adverse credit history markers can diminish over time if you go on to manage your credit well in future by keeping up with repayments.

So keep in mind that while these markers remain on your report for six years, during that time, it’s possible to build up a positive credit history to demonstrate that you can borrow responsibly. And once all defaults and any other negative markers drop off your credit report, you should see an improvement in your credit score as the impact of the positive payment history that has been built up in the meantime replaces it.

What is the impact of an adverse credit history?

As lenders rely on credit reports to assess how responsibly you manage your credit, negative markers can be detrimental to any applications you make. However, each lender will have their own way of assessing your credit report information, and this will differ based on their own criteria for approving credit.

Some may not outright reject an application due to credit history, but they might instead offer stricter terms. For example, they might offer a loan at a higher interest rate. Or, in the case of a credit card application, for example, they may offer a limit lower than what you originally asked for.

Adverse credit history can also potentially impact rental and mortgage applications. Here’s how:

1. Renting with an adverse credit history

When it comes to applying to rent, it's important to note that some negative entries that appear on your credit report – like a CCJ – are public records, which means they’re visible to prospective landlords. Because a CCJ is usually a sign of previous financial difficulties, it can affect the likelihood of your rental application being approved.

On the other hand, late or missed payments, arrears, and defaults, are only visible on your credit report, and landlords can’t see that unless you give them access to it. However, if you’re signed up to a rent reporting scheme and your landlord is enrolled in it, prospective landlords may be able to see any previous missed rental payments.

2. Mortgage applications with an adverse credit history

Since a mortgage is a significant financial commitment, lenders are more likely to be wary of an adverse credit history when considering a mortgage application. An adverse credit history doesn’t mean getting a mortgage is impossible – but it’s likely to reduce the number of lenders willing to approve your application.

Specialist lenders offer ‘bad credit mortgages’, also known as ‘adverse credit mortgages’ or ‘subprime mortgages’. These loans are likely to have a higher interest rate and may require a bigger deposit, but it means there are options for individuals with lower credit scores.

How can I check my credit history?

You can check for any negative markers by looking at your credit report. However, each credit reference agency (CRA) may hold different information about you. This is because some lenders don’t have data sharing agreements with all CRAs, which means some lenders may report to Experian and Equifax, but not TransUnion, for example.

At Checkmyfile, we offer the most detailed credit report you can get, with information from the UK’s three main CRAs: Experian, Equifax, and TransUnion.

If you spot a mistake or any inconsistencies on your credit report, here’s what you can do:

Begin by contacting the lender in question. If you believe you’ve been incorrectly assigned a negative marker, you can contact the lender reporting that information and dispute it – you’ll likely need to provide relevant evidence to back your claim.
If you’re unsuccessful with the lender, consider raising a dispute with the relevant CRA. Both lenders and the CRAs have a legal obligation to ensure that all information they hold on you is accurate. So, if you raise a dispute with a CRA, they’ll contact the lender reporting the information to validate its accuracy. During this time, a ‘Notice of Dispute’ may be placed on your credit report to highlight that some of the information showing is under dispute.
Our customer care team is able to advise you if you need help. Where relevant, we can raise a dispute on your behalf with our dispute resolution service.

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To recap

It’s important to remember that having an adverse credit history doesn't necessarily mean you can't access credit, but it can change the terms of any credit agreement that you’re offered. This could be through higher interest rates or larger deposits.

Before applying for a loan, a credit card, or a mortgage, it’s best to check your credit report so you’re fully aware of your credit history and anything that could affect your chances of being accepted.

Something as simple as forgetting to cancel a phone contract can lead to an outstanding balance – which, if not paid, could negatively affect your credit report. So it’s good practice to make a habit of monitoring your credit report over time. And the good news is that an adverse credit history is not permanent, and improvements can be made in the meantime if you begin to take the steps and build the habits to grow your score.

At Checkmyfile, we provide the most detailed credit report you can get, letting you track all the information held about you by three of the main CRAs in the UK – Experian, Equifax, and TransUnion – on a single report, so you don't miss anything important.

FAQ

It depends on whether you close the account or keep it open.
- Open accounts – show a maximum of six years’ repayment history on your report.
- Closed accounts – stay on your credit report for six years from the date they were closed. This means that payments up to 12 years old could be displayed in the account history.
We expect to see the highest band of credit score where the report contains:
- A mix of open and closed accounts.
- Regular on-time payments.
- Consistently being registered on the Electoral Roll.
- Demonstration of ability to repay what you borrow.
- Accounts that have been open for a long time.
- A range of account types, such as a bank account, mortgage, mobile phone.
Despite many myths about improving your credit score, don't feel you need to take out lots of credit solely to improve your credit score. No matter how many accounts you hold, they need to be well-maintained for your score to benefit.
Rather than being able to make quick fixes to see changes overnight, growing your score is a long-term process which can take months, even years.
Your Checkmyfile report gives you actionable steps to help you make that credit score growth happen. But this will likely happen at steady intervals during your lifetime, like when you open a bank account, register on the Electoral Roll, or buy your first home, to name a few.