Missing a bill could cost you your job - or your home

Sarah Coles
B5BKY6 Close up of a credit or debit card for security background. Image shot 2008. credit; card; identity; theft; online; secur
B5BKY6 Close up of a credit or debit card for security background. Image shot 2008. credit; card; identity; theft; online; secur

Six million people have found themselves shut out of everything from a home to a job or a mobile phone contract, and when they investigated to discover why they'd been rejected, they discovered they were paying the price for a mistake they had never suspected could cause so many issues.

The reason why these six million people were turned down was because their credit rating wasn't good enough. It will come as no surprise that a poor credit rating can damage your chances of borrowing money. It's why it's not a huge shock to hear that 1.7 million people have had a mortgage application rejected because of problems with their credit history.

However, the research from the Debt Advisory Centre (a commercial provider of debt products), found that there were other areas of life that will be hit by a poor credit rating. Perhaps most alarming is the fact that 1 million people had been turned down for a job because of it. Many employers now run credit checks on future employees to reduce the risk of fraud, and can reject applicants with credit problems.

Meanwhile just over 2 million were told they could not rent the property they wanted. This is because landlords will run credit checks to see if there's a good chance you will miss payments, and will be concerned if something is flagged up on your credit record. The research revealed that 4% of people in the UK had been turned down by a landlord for this reason. Shockingly in London that rose to an astonishing 19%.

Mobile phone companies, meanwhile, let you build up a debt with them for a month before you pay your bill. They're not going to risk this with someone who has a poor record of paying bills, which is why 2.7 million people have been refused a mobile phone contract. Overall the research showed 5% of people had been rejected for this reason. Again Londoners were more than three times as likely to run into this issue - as 17% had been refused a phone because of their credit record.

Melanie Taylor, spokeswoman for Debt Advisory Centre, says: "Credit scores aren't just relevant for those taking out a credit card or loan, they can have an enormous impact on your day-to-day life. Millions of people now find themselves excluded from doing important things in life, like getting a home, taking a job or just getting a mobile phone."

Credit scores are affected by things like missed loan or bill payments - or late payments, having too much debt and maxing out your credit cards. Small issues, like missing one credit card minimum repayment, may not seem terribly important. But it doesn't take much to raise a red flag.

Taylor told AOL "Even a late credit card payment or a missed mobile phone bill will show up on your credit history – and can impact on your ability to do everything from get new mobile contract through to buying or renting a home." She added: "It is really important that everyone checks their credit score regularly through one of the main credit reference agencies, so they can see what information is being held and they can take the necessary steps to improve their credit history as soon as possible."

10 things to do to repair your credit rating

It's vital to steer clear of any company that promises to repair your credit rating quickly: they can't speed up the process, they will only take your money for doing the kinds of things you can do without their help. Instead it's worth taking these ten steps:

1. Get hold of your credit report from the credit agencies, and check whether there are any mistakes on it. If there are any debts wrongly listed, contact the agency and they will work with the lender to correct it.

2. Check for fraud. Make sure you recognise everything on your report. There is a chance that someone else is running up bad debts in your name. If you find something unexpected, contact the police and the credit reference agency - which will have a fraud department.

3. Register to vote. If you haven't already done this, it could be what's holding you back. Lenders check your address against the one on the electoral roll and if there's nothing on there, they cannot confirm your address.

4. Add an explanation. Most of the agencies will let you do this. So, for example, if you fell ill and missed payments when you were unable to work, you can add a Notice of Correction so that lenders know it was out of the ordinary.

5. Check for associations. The report will list the names of anyone you have ever held a joint financial product with, and their record will affect yours. If you no longer have anything to do with that person, you can contact the agency and arrange for them to be disassociated.

6. Close any unused accounts. The amount of credit you have available is one of the factors people consider when checking your record. If you have accounts you are not using, this is a black mark you can get rid of immediately.

7. Toe the line. The credit report will show how you have been managing your accounts in detail for the previous 12 months, and in general for the past six years. They are most interested in your most recent behaviour, so even if there are things on your record you cannot do anything about, at least you can ensure you have a good record in future.

8. Pay down your debts. Your record will show if you have maxed out all your credit cards and used all of your overdraft, and lenders will take this as a worrying sign. Try to pay them down until you are using just 75% of your debt, so that your record shows you have the ability to restrain yourself.

9. Be sensible about applications. Each time you apply for credit it shows on your record, and if you apply for too much at once it will count against you. If you have been turned down for credit, it makes sense to put things right on your report, and then wait a decent length of time before applying again.

10. Finally, you may have to wait. If you made mistakes in the past, but are sticking with all the rules now, then the longer you wait, the more of your credit record will read positively. After 12 months the report will show fewer details about mistakes you have made, and after six years, your report will be spotless.

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