A CCJ is a county court judgment issued by a court that orders you to repay the debt to lenders, which you have been refusing to repay. Once the CCJ is issued against you, you will have to settle the whole debt in full within 30 days from the date of issuance. However, if you take more time to pay it off, it will be recorded on your credit report and the Register of Judgments. This will be recorded as a satisfied CCJ as soon as you discharge the whole debt.
Having a CCJ on your credit file is not appreciated by lenders. Even if you need a small amount of money, you will struggle to receive approval. The CCJ remains on your credit file for up to six years. Despite a satisfied CCJ, your chances of getting approval for a loan are almost nil.
- A CCJ results in rejection of loan applications. No lender will sign off on your loan, even though it is a paltry sum.
- Borrowers with a CCJ are perceived as extremely risky borrowers. It clearly suggests that you failed to repay your obligations previously.
- Few lenders might accept your application, but they will charge exorbitant interest rates.
- Borrowing with a CCJ is expensive, and there is a risk of falling into debt.
Ways to check if CCJ is affecting your loan application
If you think a CCJ could affect your loan application, you can find out with the following steps:
Review your credit file
The first source to obtain this information is your credit file. You should contact all three credit reference agencies: Experian, Equifax and TransUnion. You can get a copy of your credit report for free once a year from all credit bureaus. Upon receiving your credit report, look for a CCJ. Check if it is satisfied or unsatisfied.
Credit bureaus can also make errors in maintaining records. It is likely that the CCJ is marked as unsatisfied despite discharging your previous obligations in full. You can raise the dispute. Normally, a CCJ takes six years to drop off.
Check the Register of Judgments
You should also check the Register of Judgments. By looking into it, you can get to know whether your CCJ is active, satisfied or removed. Bear in mind that lenders will check this register when reviewing your application.
Do not keep your investigation limited to your credit report. You should also check the Register of Judgments.
Ask the reason for rejection
If you have recently applied for a loan and you have been cast aside, you should ask your lender the reason for rejection. It is likely that they refused a loan as you have a CCJ. However, sometimes the reason for rejection is not a CCJ. They turn you down because they found you a risky borrower.
Because you have a satisfied CCJ or it has been removed from your credit report, it does not suggest that your chances of being accepted will immediately go up. Your overall credit profile will still be very weak. An adverse credit rating is one of the reasons why lenders reject your application because it is an acknowledgement of your financial comportment. Of course, no lender would feel inclined to lend you money if your credit score is not up to scratch.
How to minimise the impact of a CCJ
You should minimise the impact of a CCJ:
Pay off your outstanding debts at once
Once a CCJ has been issued against you, you can immediately settle all dues. If you pay off the whole balance within a month, you can avoid a CCJ being recorded on your credit file. If it is not possible, make sure that you discharge it as soon as possible, so that it is described as satisfied.
Pause borrowing
After the settlement of a CCJ, you should stop borrowing for a while. In fact, you should avoid borrowing money for small emergencies. Make sure that you stash away money for a rainy day so you do not have to rush to direct lenders when you are caught unawares by unexpected expenses. However, if you still need to borrow money, you can consider loans for people with CCJ in the UK.
You should try to avoid borrowing money for at least two years. Afterwards, you can think of making efforts to improve your credit score. For instance, by taking out credit builder loans, you can ameliorate your credit score by paying down the debt on time. These loans are paid down over a duration of six months.
Do not be under the impression that your score will automatically go up as a CCJ is removed from your credit file. You will have to demonstrate your ability to manage loans. Stay away from payday loans and other similar emergency loans, as they will do more harm than good to your credit rating.
Things to keep in mind
Your credit score cannot improve overnight. Credit builder loans can help make your credit profile look better, but they do not guarantee that you will not receive high interest rates.
- While lenders peruse your credit report, they use their own method to calculate the risk involved in lending you money.
- Despite an improved credit rating, you might be perceived as a risky borrower. If that is the case, you will end up with high interest rates.
- Borrow money only when you are certain about your repayment capacity, and it is urgent.
The final word
A CCJ can hinder the approval of your loan application. It is enjoined that you avoid borrowing money unless a CCJ is removed from your credit report. However, if you are in urgent need of money, it is vital that you assess your repayment capacity.
CCJs have far-reaching effects. You should try to meet your obligations on time. It can be difficult to fix your credit score after a CCJ is issued. Make sure that you never borrow more than you can afford.
