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If you miss or fail to make agreed-upon payments on some sort of debt, you may receive a default notice or “notice of default.” A default is then recorded in your credit file, which can negatively impact your credit rating. If you are then trying to get another form of credit such as a mortgage or loan, or are applying for a position which includes credit checking as part of the pre-employment verification, these defaults could count against you.

What is a Default Notice?

A default notice is a letter sent by the company you owe money to in order to tell you that you are falling behind on payments, and your account may be at risk of defaulting. Usually, a default notice is sent after six months of missed payments. The creditor will usually give you at least two weeks to catch up on missed payments. If you cannot pay, your account will default.

Default Notice and Your Credit Rating

While a default notice itself does not directly affect your credit file, if you do not pay and your account defaults, this will affect your credit score. Creditors may perceive you as a higher risk, and this makes it more difficult to get new loans, credit cards, mortgages, or even a new mobile phone contract.

When you get a default notice in the post, your creditor may demand that you pay the full amount outstanding on the account. While you can ask them whether you can pay in affordable instalments, your creditor does not have to agree to this.

After Default

If you have been given the chance to pay off the debt and fail to do so, the account will officially be in default. If this happens, the company you owe money to has a few options. They could:

• Transfer the debt to a collection agency.
• Take the matter to court.
• For hire purchase debt, ask the court to repossess the vehicle or other goods.

Defaults and Your Credit File

A default will be recorded on your credit file for six years, even if you settle the debt in full. Any default on your file is going to make it more difficult to get other forms of credit, such as mortgages and mobile phone contracts. After six years, the defaulted debt will be removed from your credit file, even if the full repayment has not been completed. Some jobs in the financial services sector may be affected if your account defaults, particularly if credit checks are done before a job offer is made.

Avoiding Defaults

As defaults can have a significant effect on both your credit report and potentially your employment, the best course of action is to try to avoid getting a default in the first place. Defaults are only given after six months of missed payments, so as soon as you realise you are getting into difficulties, speak to your creditor. Many will agree to a payment freeze or temporary lower payments to avoid the expense to them of pursuing the matter further.

Searching for a new job is one of those tasks which can be exciting, frustrating, and demanding of your time and effort. Once you’ve navigated the application and interview, that’s often not the end of the process. Many employers are now conducting pre-employment checks into academic qualifications, references, or employment history. While your credit history is one of the less common checks in the application process, there are some occupations where employers ask to look at your credit report before making a firm job offer.

Which Employers Do Credit Checks?

Most employers do not require credit checks, and those that do must obtain your consent. Typically, employers only run credit reports for roles that involve significant financial responsibility, including positions in industries such as:

1. Law
2. Finance
3. Senior Management
4. Police and Military

What Information Can Employers Access?

Employers may run background checks like credit and criminal record assessments, for security purposes, and each organisation will make their own decisions about what checks are right for their needs. If they want to take a look at your credit report, they will only have access to publicly available information, such as County Court Judgments (CCJs), insolvency records, and bankruptcy filings. Importantly, they cannot view your credit score. If an employer wants to look at your credit report, then this won’t affect your credit score or your chances of getting products like a mortgage, credit card or loan.

Getting a Job with a Poor Credit Report

Employers will use a credit report as just one factor in deciding whether to make a job offer or not, so if your credit report is less than perfect it still might not damage your chances too much. Employers are generally more concerned with significant red flags, such as bankruptcy, than occasional missed payments on your credit card. Employers may worry that severe financial troubles could impact an employee’s job performance, or in the worst-case scenario, lead a worker to be vulnerable to blackmail or be tempted to steal. The influence of adverse credit markers such as bankruptcy or CCJs tends to decrease over time, particularly if you have managed your finances responsibly since you were in financial difficulties. As time passes, your prospects of getting a job requiring a credit check will improve.

Improving Your Credit History

Your credit history can have broader implications, especially if you are thinking about applying for a mortgage or a loan. Anyone has the right to look at their own credit file, so request a copy of the information the credit referencing agencies have and check it for accuracy. If you find any mistakes or defaults which don’t belong to you, ask the agencies to correct their information. Then you can start to gradually improve your credit picture by acting in a financially responsible manner; paying your bills in full each month, not overstretching yourself, and painting a picture of yourself as someone who is on top of your money, organised and efficient.

If you have been given a CCJ (County Court Judgment), it could seriously affect your finances for as long as it stays on your credit record. It may make it difficult to get credit, and depending on your job, might even lead to trouble with pre-employment credit checking. CCJs are only given out as a last resort, after you’ve ignored previous requests to settle a debt. The easy advice is to avoid getting one in the first place, but if you have got into financial difficulties and have a CCJ on your record, there are three key things you can do to remove the CCJ and start to repair your credit score.

1. Pay Within a Month

Paying the full CCJ amount within one month from the date of the judgment leads to its complete removal from your credit report. It’s as if the CCJ never existed. Often, there is some sort of dispute over whether the CCJ is justified or whether the debt is owed at all, but the legal advice is usually to pay the CCJ to get it off your file and then continue the process of challenging it, especially if you have been given a CCJ over something minor like a parking fine. Once you have settled the CCJ in full, the court will feed that information back to the credit reference agencies, who will remove it from your file. When you pay the CCJ, you will need to show the court a completed Certificate of Satisfaction, and proof that you have paid such as a receipt or bank statement.

2. Wait Six Years

After six years, the CCJ is automatically removed from your credit record, even if you haven’t paid it. This doesn’t mean that you don’t owe the money anymore, and in certain circumstances, the claimant can still enforce the CCJ by sending in bailiffs. If your CCJ is already relatively old, waiting for the six-year period to elapse might be the best option.

3. Apply to Have the CCJ Officially Set Aside

When a company takes you to court over an unpaid debt, you have the right to be in court to defend yourself. If you don’t appear in court or acknowledge the claim, the CCJ is issued automatically and is called a “default judgement”. If your CCJ is a default judgement, then you can apply to have it set aside if the process has not been followed correctly. This could be something like sending correspondence to the wrong address which meant you were unaware of the court case against you. There are court fees involved with asking for a CCJ to be set aside, but if your claim is successful, the court usually orders the other side to pay these back to you.

If you have already settled a CCJ debt, this doesn’t stop you from asking to have it set aside, although it might make things more complicated. It’s always best to take legal advice if you are unsure about the best steps in your situation.

One of the main issues affecting people who have recently moved to the UK is difficulties in getting credit cards, loans or even a mobile phone contract due to their lack of credit history. HSBC has become the first British financial institution to check international credit history when newcomers to the UK are applying for credit cards. This could be of particular benefit in the future to people who are applying for a credit report check as part of standard pre-employment checking.

How It Works

HSBC UK credit card applicants, whether new or existing customers, can now choose whether they want to use their international credit history when applying online. Currently, the HSBC service covers 12 countries, including Australia, Brazil, Canada, Spain, Switzerland, and the United States. HSBC has partnered with an international credit referencing agency and is hoping to extend the service to other countries in the future. Opting in for international checks requires your consent for the sharing of this information. Applicants will still be asked for supporting documents such as identification and income details. More information will be needed from anyone looking to access their international credit record, such as their home country ID number or passport number, overseas addresses, and details of when you moved to the UK.

Impact on Credit Score

The impact on your credit score of allowing a UK bank to access international credit history with HSBC on your credit will vary depending on which country you are dealing with. If you are accessing credit history from Australia, India, Spain, or Switzerland for example, this is classed as a soft search which does not affect your credit score. However, credit history from Nigeria or the United States is recorded as a hard search which could affect your credit score. As this system is still very new, it is likely that the system will be standardised over time as more companies start looking at international records.

Alternatives To International Credit History for UK New Arrivals

If you are new to the UK and need access to credit, another option is to look at credit cards marketed for individuals with bad credit. These cards are designed for people who find it difficult to get loans or other credit because of a poor credit score or lack of credit history. These cards typically offer lower limits, higher interest rates, and fewer benefits, but they can help you build your UK credit rating if used responsibly by ensuring that the bill is paid off in full every month. If you are eligible to vote, then getting onto the electoral roll at your British address can also help improve your credit score, as can being listed on utility bills for gas, electricity, or internet. Building credit does take time, and it can take a year or more for scores to improve. Anyone can sign up for one of the apps to manage credit score to track how things are improving over time.

In the UK there are three major credit reference agencies which manage our credit report and credit score. But what exactly is a credit score? Is it the same as a credit report? What qualifies as a good or bad credit score? How do lenders use credit scores when making decisions? And what role does a credit score or credit report have in the pre-employment identity verification checks which some employers use?

What is My Credit Score

To understand credit scores, we have to start with the credit report. Your credit report is just a financial record of your past and present activities. Credit card providers, banks, utility companies or mobile phone providers give information about you to credit reference agencies on a monthly basis. This information includes things like whether you have applied to take out any new loans, how regularly you are paying off the debt you already have, whether they are taking you to court over unpaid debts and so on. This is your credit record. The agencies will then take the information on your report and generate a score. Each agency does this slightly differently, so it’s less important to pay attention to the exact number. Instead, look at the grading you are given, which ranges from “very poor” to “excellent”.

Lenders consider both your credit score and the details on a credit report when deciding whether to give you credit.

Other Factors Affecting Credit Score

1. Affordability – many people believe that the higher your salary, the higher your credit score. That’s not strictly speaking the case. Lenders are more interested in how much money you have left over after all your essentials have been paid for. If money is tight – whatever your salary – lenders are going to worry that you will not be able to afford payments.
2. Credit cards – lenders are interested in what percentage of your available credit you are using. If you have one card and spend up to the limit each month, this is viewed negatively even if you pay it off. Having a few cards with available credit which you are not using ensures you are seen as a better risk.
3. Bill payments – your gas and electricity suppliers or mobile phone company will all share information with the credit reference agencies about whether you are paying on time. Late payments will go against you.
4. Loyalty – credit agencies give higher scores to people who have been with the same bank or building society for years. If you change your current account, then your credit score might dip until a few months’ payments have been made from the new account.
5. Frequent application – applying for multiple loans or credit cards in a short period will negatively affect a credit score as lenders may perceive you as desperate.
6. Association – if you have a joint bank account or mortgage with someone else, any debt which they are in can affect your credit score too.
7. Online gambling – credit reports might have information about where you spend your money as well as how much you spend. Payments to multiple online gambling sites are a huge red flag for lenders.

If you have recently applied for a job which involves credit checking, identity verification and other pre-employment checks, it can be a confusing time. Many of us are confused about our credit score or credit report, and concerned about what might be disclosed to our potential employer. Worrying about your credit score can be understandable but ignoring it won’t make it go away. A bad credit score may have significant consequences, but improving it is within your control too.

Take Control and Find Your Credit Score

The three main credit referencing agencies in the UK are Experian, Equifax, and TransUnion. Each of these three credit bureaus are legally obligated to provide you with your credit report upon request, free of charge. This basic credit report typically just contains the basic details of name, address, and any finance outstanding. More detailed reports are available, and many websites or apps offer a free trial period (typically 14 days) before requiring payment. This will show your credit score number.

Poor Credit Score

There are lots of reasons why you might have a poor credit score. Some of these are:

• Out-of-date information, such as an old address you have moved from.
• Not being registered to vote at your current address.
• Limited or no credit history, if you have recently moved to the UK or have just turned 18.
• Excessive credit – someone who regularly reaches or exceeds the credit card limit.
• Lots of loan or credit applications in a short time period.
• Missing payments or defaulting on loans.
• Bankruptcy or CCJs (county court judgements).

A growing issue is people who are “credit invisible”, estimated at around 5 million in the UK by Experian. These are people who just don’t have enough information on their credit record to allow the credit agencies to form an opinion about them.

Improving Your Credit Score

A poor credit score is not permanent and can be improved with time, commitment, and responsible financial management. If you can boost your credit score, this gives you a wider choice of loan products, and potentially better interest rates too. There are some very simple steps anyone can take to help improve their credit score:

• Register to vote on the electoral roll at your address.
• Regularly check your credit report for errors and ask the credit reference agency to fix any mistakes you find.
• Get your name on household bills, for things like gas, water, or cable TV.
• Pay your bills on time, and in full. Use reminders or set up direct debits if you struggle to do this.
• Pay more than the minimum payments on your credit cards, ideally paying the full balance every month, or as much as you can.
• Keep checking your credit report and flag up anything suspicious right away – identity theft is a growing problem and can seriously affect your credit score.

Having a bad credit score doesn’t mean you can’t get credit at all. It may just mean you have a restricted pool of credit options and might pay a bit more in interest until your score improves.

There’s often a lot of fearmongering about credit history and how much it will impact on your everyday life and future financial choices. This is especially the case when you are facing a credit check as part of pre-employment checking for a new job. Understanding the process and what employers and lenders are looking for should help deal with some of the myths around credit scoring.

Check Your Credit Report

The first step is always registering for a copy of your personal credit report. You can do this online for free through credit reference agencies like Experian and Equifax or via third-party providers like Clearscore and TotallyMoney. Once you’re signed up, you will receive updated reports and scores in by email, allowing you keep your eye out for any unexpected changes. When you get your credit report for the first time, look closely at all of the personal and financial details. These reports may not always be correct, so it’s essential to ensure the information on file about you is correct. Some items you’ll find in your report are:

• Personal information: Your name, date of birth, and address, including past addresses within the last six years.
• Financial associations, such as joint mortgages or shared loans you have in joint names with other people.
• Whether or not you are listed on the electoral roll as a voter at your address – if you are not, this will decrease your credit score dramatically.
• Details of your borrowing, including outstanding balances and payment history for accounts like mortgages, credit cards, store cards, personal loans, and overdrafts.
• Details about any County Court Judgments (CCJs), bankruptcies, and Individual Voluntary Arrangements (IVAs).

What Doesn’t Appear on A Credit Report – The Myths

Many people are unsure about what will appear on a credit report. These do not include any details about:

• Savings accounts.
• Salary, wages or who your employer is.
• Your criminal record.
• Parking tickets or driving licence points.
• Arrears on your council tax.
• Details of any payment holidays or Covid related payment freezes you’ve taken on mortgage or other loans.
• Student loans – whether you are in default or not.

There are other persistent myths about credit reports which are also unfounded. The biggest of these is probably that banks or other financial institutions have a “blacklist” of people who are blocked from all credit. Each lender will have their own rules about who to offer credit to. Similarly, institutions will not blacklist or bar whole streets, postcodes, or towns from getting credit. The only thing which will stop you from getting credit is your own credit history and record. If you have defaulted on credit agreements in the past or been consistently late in paying, financial lenders are going to be concerned that you will be a bad risk. Improve your credit record by keeping an eye on your credit report and correct any errors which you find on it. It might take time, but ensuring you always pay bills on time will eventually be reflected on your credit score.

Very few of us can afford to stroll into a dealer and pay for a new car with cash. Finance agreements are commonplace, and lenders always do a credit check before deciding on your car finance application. The credit report plays a significant role in their decision-making process, along with other checks such as verifying your identity and address. Credit reports give them lots of details about your credit history, allowing them to decide whether you are a good risk for finance – or not.

How Credit Scores Work

Every person in the UK aged 18 and above has credit score number representing their creditworthiness. Experian, Equifax, and TransUnion are the three main credit reference agencies used by lenders. While several companies offer credit scoring apps or websites, they rely on data from one of the three major agencies. Your credit score reflects your credit rating, usually on a scale of up to 1,000, with a higher score indicating better creditworthiness.

Checking Your Credit Score

The main credit scoring agencies —Equifax, Experian, and TransUnion—must provide you with a free copy of your credit report if you go direct to them. However, you can also opt for paid services from them which give you more information or more detailed access. You can also use third-party websites or apps like ClearScore and Credit Karma, as these use information taking directly from one of the main reference agencies.
By law, the main credit references must give you a copy of your credit report free of charge. They are allowed to charge for extra services such as credit improvement tips, but you don’t have to sign up for these services if you don’t want to.

Applying for Car Finance and Your Credit Score

When you apply for any form of finance, including a car loan, the lender runs a credit check. If you’re using one of those services marketed as finding out whether you’re likely to be accepted, this is a “soft check,” which doesn’t leave a mark on your credit. However, if you make a firm application for finance, the lender performs a “hard check,” which appears on your credit report. Making one application won’t go against you. Multiple applications may suggest desperation for credit, making you appear high-risk to lenders.

Factors Affecting Car Finance Credit Score

There are many factors which influence your credit score, whether for car finance or other loans. These include your borrowing history, late payments, financial difficulties, on-time repayments, and your credit-to-debt ratio. Being on the electoral register at your current address is one of the easiest things you can do to improve your credit record. Lenders will also want to see that you are managing your money responsibly by paying regularly every month, preferably by direct debit. Pay off any longstanding debts and deal with any county court judgements (CCJs). If your problem is that you have no credit history at all and therefore no information for the agency to make a judgement on, it can be useful to get a credit card with a low balance and pay it off in full each month.

In the job hunt process, putting together a stellar CV and preparing for interviews are undeniably important steps. However, employers are increasingly using additional measures like pre-employment credit checks as part of the hiring process. These checks are aimed at verifying your identity, checking the accuracy of your application details, and evaluating your suitability for the role. Employers might also check your social media profiles, verify your academic qualifications, contact your references, or run a criminal record check. One of the least understood of these pre-employment checks is the credit check.

What is a Credit Check?

A credit check looks into your financial history. These are typically used by financial institutions to when applying for loans but can also be used by employers. Most employers who use these checks are also operating in the financial services market, or employing people in roles where they have lots of access to cash.

Employers doing credit checks can only access data from public databases, such as CCJs and bankruptcies. They cannot access private information like your credit card history or financial associates. Additionally, they cannot view your credit score.

Why Do Employers Do Credit Checks?

Credit checks were once associated with financial sector positions, they have now become a routine part of recruitment across various industries. Employers generally conduct credit checks for two primary reasons. Firstly, they want to make sure you are who you say you are by cross-referencing the details you provided with those in your credit report. Secondly, they want to try to identify any patterns of financial mismanagement. This is done not only in roles giving access to money or accounts, but also many employers feel that a solid credit report or score shows that the employee acts responsibly and is organised.

Timing of Credit Checks

Employers choose when to do the credit check during the recruitment process. Most companies will do all the pre-employment checks after an offer has been made, and typically the offer will say “subject to pre-employment checking”. Employers must tell you what checks they are doing and get your permission. This sort of pre-employment credit check will not affect your credit score.

What the Employer Sees

Credit reports aren’t secret, and you have the right to request a copy of yours from any of the major credit referencing companies in the UK. There are websites or apps like ClearScore or Credit Karma which you can sign up for and both access your current report and track how it changes over time. Once you have your report, check it for accuracy as the agencies have an obligation to put right any mistakes. Deal with any old debt which you discover on your file and take advice from the apps and websites about what you can do to improve your credit score if it is not as good as it could be. Being able to explain to an employer the steps you are taking to improve matters can only go in your favour.

An Adverse Credit Check is a specific type of pre-employment screening that employers might choose to carry out on current workers or potential employees. Its purpose is to uncover any significant adverse credit history. These checks are important in the pre-employment screening process, especially in roles where employees will have access to cash, accounts, or valuable assets. Adverse Credit Checks can help deal with management concerns about staff fraud or dishonesty. An employee with a history of financial vulnerability or who is regularly spending way beyond their means may be more susceptible to bribery, or temptation of taking money from customers’ accounts.

What is Adverse Credit?

“Adverse credit” means looking at any history of late payments or non-payment in an individual’s credit report. Adverse credit information includes:

1. Individual Voluntary Arrangements (IVAs) – A formal agreement between an individual and their creditors. These are taken out when someone has a higher level of debt and struggles to pay it all back.
2. County Court Judgements (CCJs) – these are issued when a customer is taken to court by a company over an unpaid debt, or a payment issue which has been ongoing for several months or years.
3. Bankruptcy – this is the most serious form of adverse credit. Bankruptcy only happens when someone is in such serious financial difficult that the court steps in and takes charge of their finances for them.

Adverse Credit and Credit Score

An Adverse Credit Check is purely a pre-employment financial assessment is not concerned with the applicant’s credit score. The generated report is different to the credit report which is used by banks or credit card issuers when making lending decisions. It’s important to remember that employers are really not interested in when you took out a mobile phone contract and how much you are paying each month on your rent or mortgage. These adverse credit checks are really just looking for the most serious financial issues which might lead to concerns over your ability and suitability for the job you are under consideration for. Any good employer will be able to talk you through the process, explaining exactly what will be done, and what information they will be using to make their decision.

Getting An Adverse Credit Check

Most Adverse Credit Checks are completed within five minutes, so as a prospective employee you won’t be kept waiting for months for someone to make a decision. The employer can complete the checks online and will receive the results of the check by email or as a .pdf document which they can download. Often, employers will outsource all of their pre-employment checks to an external company. Remember also that the credit check is just part of the information which the employer will use to make their final choice of who to employ. If you are concerned that your credit check might go against you, then seek advice from a debt charity about what steps you can take to make yourself appear a better prospect as an employee.