Products like payday loans can affect things (Picture: Getty)

Debt doesn’t end once you pay back what you owe.

This is the ugly truth of borrowing money in the day and age where algorithms are everything, and products like mortgages and even jobs are decided off the back of your credit score.

While it’s not the end of the world if you have a bad credit score, and a history of ‘bad debt’ (including missed payments, defaults, and a high amount of borrowing), it can affect things in the future.

Thankfully, there are many ways to improve your credit score – and after six years, any negative marks will be wiped – but it’s worth knowing that your credit score really is more than just a number.

Here’s what can be affected:

Jobs

It might seem strange, but a lot of jobs will credit check you before you start working for them.

In legal and financial roles this is pretty much a necessity as you’ll be handling money a lot for your job.

However, you could also be subject to a credit check at call centres and for a number of other office-based positions.

They’ll check whether you have a history of handling money well, and you can be rejected for the job if they find your record isn’t up to scratch.

Mortgages

Mortgages – which are often seen as a form of ‘good debt’ – are one of the main things you can be rejected from if you have poor credit.

Mortgage providers can be relatively picky about who they lend to – given the size of the loan – and even small things can affect whether they’ll choose you.

For example, some will refuse to lend to you if you’ve had any sort of payday loan over the last few years, as they may deem you to be a high risk borrower.

Each lender will have a completely different criteria for what they want in a customer, so you can have a ‘perfect’ credit score on paper, but can still be rejected due to high debts in the past.

In some cases, you might not be outright rejected for a mortgage, but may find that you pay a much higher interest rate.

The best thing to do is to get a mortgage broker, who will be able to advise you on the best course of action based on your credit history.



What if I have no credit rating?

It may sound odd, but this can actually be detrimental too.

Banks and other lenders are unlikely to lend to you if they don’t know you at all, and your credit history is what helps them do this.

Things like phone contracts can count towards your credit scores, so you don’t necessarily need to go out and grab a credit card to rectify things.

The most important thing is that, if you do borrow any money or have any contracts, you pay them back on time and as fully as possible.

Rentals

Even letting agents and landlords now use credit checks to see if you’re going to be able to pay your rent.

They do need to get permission before running a credit check on you, but can reject you for a tenancy if they find things like County Court Judgments or insolvency agreements.

This is why it’s so important to keep an eye on your credit report (even though the number you’ll see isn’t the same as the information they’ll see). It can give you clarity, which allows you to be up front with them before your application.

That way, you can advise them, and either avoid unnecessary fees or being rejected once you’ve paid a deposit, and they may be able to come up with other solutions.

In some cases, they might be happy to accept despite your poor credit, or may offer the option of using a guarantor.

The number you see on your report isn’t what lenders see – but they can see your credit history (Picture: Getty)

Other forms of credit

If you ever need a loan, credit card, car finance, or a phone contract, a credit check will be run.

If you have poor credit, or a high reliance on debt to fund your everyday life, this can you signal you to be a ‘subprime’ customer.

So, the bank or lender may offer you a product, but because you’re deemed as high risk it may not be a great deal.

While you’ll often see deals that offer 0% APR borrowing or plenty of bonuses for spending with them, these offers will normally be for those who have a good credit history.

Subprime customers can face high interests, different payment terms, or expect you to secure your loan with something like your car, home, or a guarantor.

As mentioned above, having debt on your record isn’t the end of the world. Before you borrow, though, you should be aware of how reliance on borrowing and failure to repay can change your financial future.

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