How Bad is Bankruptcy or a CCJ For My Credit?
If there is one area of our lives and personal finances we are learning more about today then we did years ago, it is about our credit history and credit scores.
Years ago viewing your credit report or knowing your credit score was sort of like looking behind the curtain in the Wizard of Oz. No one really knew their credit files or credit scores.
That has changed today.
Today there are companies offering you to view your credit reports and credit scores, and you can track and monitor them on a regular basis; which is good.
Good because more and more our credit scores are being used in areas not just for the granting of credit and loans.
Jobs, insurance policies, and other areas are now using credit reports and credit scores in making a decision on issuing an insurance policy or hiring someone.
So it is important not that we know our credit scores and our credit histories, but we also need to monitor them over time. And if there are any errors, we need to correct them immediately.
In looking what makes up our credit scores and asking the questions, does bankruptcy and CCJ’s really affect my credit that much, we need to look at the percentage of each factor used to address the question.
Factors Used in Credit Scoring
* Payment History 35%
* Balances on Accounts 30%
* Length of Credit History 15%
* Types of Credit You Have 10%
* New Credit or “Footprints” 10%
As we can see, the largest percentage used in making up your credit score is payment history, 35%. So if you miss payments, are in arrears, and pay late, it is going to have a huge impact on your credit score.
If you couple being in arrears, with being in debt or over-extended, and having high balances on your accounts, which is 30% of your credit score, you are in a very bad place for your credit score.
Balances owed and payment history together make up 65% of your credit score.
Bankruptcy, CCJ’s and Your Credit Score
Everything that is reported on your credit history stays on the report for six (6) years.
Negative, positive, anything, stays there for 6 years.
After the 6 year period, these accounts are supposed to drop off, however, they do not always do this, and it may be up to us to contact the credit bureaus to have the report updated.
When someone goes bankrupt, or receives a CCJ/County Court Judgment, there is more going on that has lead up to this moment in time.
Most people do not go bankrupt unless they are being chased for payment(s) by their creditors, and many have been in arrears or struggling with their accounts/debts for years.
So while the bankruptcy itself does damage their credit file, there was a lot leading up to that point that has already done damage to the credit score and credit file.
The same is true of CCJ’s.
In most instances you do not miss just one payment on a loan and then the lender seeks out a CCJ. The process is a bit more than this.
Multiple payment may have been missed, and the lender has followed a process of sending out collection notices, statutory demand notice, and then began the process of seeking out a judgment in court.
None of this is an overnight or next day process.
So as with bankruptcy, having a CCJ is not good for your credit history and credit score, but it is simply the end result of a much lengthier process.
And there are ways to remove CCJ’s from your credit history, one is to pay the judgment within 30 days after it has been issued.
If you can get the CCJ set aside, this, too, will not affect your credit report. However, you need to have a good reason for a Judge to set the CCJ aside.
Once you pay the judgment and it shows a zero balance, this will help in rebuilding your credit as well.
Then there is the course of time, after 6 years any bankruptcies or CCJ’s will drop off.