Getting a loan when you have a CCJ is difficult, but not impossible. The possibility depends on whether you have paid off debts in full within a month. This is because once debts are paid off, you can apply for removal of the CCJ from your credit report.
Wondering how this can help you improve loan eligibility? In most cases, it can work in your favour, and this information will be visible to the lenders. Seeing this, they might get ready to help you with finances.
What would happen if you need urgent loans with CCJ? Then, you need to be patient, as recovering from very poor credit scores cannot happen in a snap. For this reason, loans may not be an ideal way to borrow money when you are in this situation.
In that case, you might have to look for alternatives. You can even try improving your loan eligibility despite receiving a CCJ. Here is a roadmap designed for you in this blog.
How to go ahead with a loan application when you have a CCJ?
This particular stage can worsen your chances of getting loans. The reason is your unstable financial behaviour, which shows that payments were missed. As a result, the lender has taken legal action against you.
This may appear to be the end of the road, but recovery from this point is possible. There are steps that can help you improve your loan eligibility.
- Check the timeline and status of the CCJ
When this is issued, you get a 30-day window to clear debts and request removal of the CCJ from your credit report. It will be shown as “satisfied” in your credit records and can be seen by lenders.
However, if you could not meet this timeline, despite paying off debts in full afterwards, the CCJ will remain for 6 years. In this case, it will remain as “unsatisfied” in your credit report, and lenders will be able to see this.
After 6 years, the information about the CCJ will be removed automatically from your credit report. This may happen even when the debt is still unpaid.
- Fetch the certification of “satisfied debts”
Now, if you have made the most of the 30 days to pay off debts, you can request proof as certification. You can collect this proof of payment to submit it to the court finally.
This certification will be accompanied by a certain fee in order to get an official proof of “satisfied debts”. Then, you will have to update your credit file by approaching credit reference agencies.
- Review your credit report for errors
You can easily get a copy of your credit report twice a year. This enables you to find errors that may have existed in your credit report, and you did not realise it. Their presence can cause damage to your credit scores.
Incorrect personal details or address can prevent the lenders from verifying your background. There is another reason why you must audit your credit report even after paying off the debts in full.
This is because despite being paid off in full, the debt can still remain marked as “unsatisfied”. When you go through your credit report, you can identify such errors and do the needful to fix them as soon as possible.
- Register for electoral roll
One of the easiest ways to upgrade your credit profile is by showing yourself as registered to vote. Then, the lender can verify your identity or address. The first step of verification will be easy to navigate.
Again, when your background is easily verifiable, it reduces the risk of fraud for the lenders. This is helpful in giving an immediate boost to your credit score.
- Demonstrate consistent income
One of the key factors that grabs the attention of the lender is your ability to repay loans. This can be ensured by validating your income. Now, if you can show that you have enough disposable income to support loan payments, your loan eligibility will be improved.
For that, you need to calculate how much from your net salary remains after deducting expenses and debts from it. Provide valid and proper proof of income that can help lenders verify your earnings.
You should also be able to see that your emergency cash buffer remains unaltered even after paying loans on time. This means that you must prevent yourself from overstating your income. The lender will be able to find it out, and this will result in rejection only.
- Work on creating a positive credit history
CCJ is not the ultimate factor on which the lender makes a decision. Even though the information continues to stay on your credit report for 6 years, it does not mean that you should sit idle.
Try to utilise this period for the betterment of your credit score. You will have financial commitments to handle during this tenure as well. Be punctual in making payments, as it will create a positive image for you.
Lenders will look into your financial activities while issuing loans with CCJ. If you have been able to demonstrate that you have managed financial responsibilities responsibly, you can be ahead in improving your loan eligibility.
Adjust your expenses or add a new income stream so that you can pay off debts as soon as possible. With the debt pile lowering, your loan eligibility will start improving.
- Do not apply for multiple loans together
Seeing attractive offers, you may consider applying for multiple loans at the same time. There is no problem if it is only up to getting pre-approval. This does not affect your credit scores, as a soft analysis will be conducted.
However, if you decide to proceed with your formal application, it will require you to go through hard checks. When you are dealing with multiple loans, you will have to go through multiple hard checks. This will be fatal to your credit score.
The bottom line
When you have a CCJ and need immediate loan help, getting a secured loan may be possible. At the same time, you can try getting loan assistance by providing a guarantor. In both cases, there will be a backup if you fail to repay loans on time.
