In the UK, if you’ve failed to pay your debts after your creditors send reminders, they can apply for a County Court Judgement (CCJ) against you. If you don’t apply to remove, or set aside the CCJ, it will stay on your credit file for six years. As a result, your credit rating will be damaged, which reduces your chances of applying for finance, and consequently, your employment and enterprising opportunities.
Higher costs for monthly outgoings
If you have credit agreements, mortgages or insurance premiums from before a CCJ appeared on your file you could find yourself paying more when the renewal dates come around. Companies tend to charge higher rates for customers with worse credit scores; it indicates you as being at a higher risk of not paying on time. A lot of the major lenders won’t even provide mortgages to those deemed ‘high risk’, so you may have to shop around for a specialist provider that will accommodate borrowers with poorer credit ratings.
It makes it harder to get credit
Having an unsatisfied CCJ on your credit file, or any unpaid debt can lower your credit score. The unhealthier your credit score, the harder you’ll find it to apply for loans. Banks and credit card companies will check your credit history before approving you for accounts, loans and cards. The more debt and defaults on your file, the lower your score will be. A low score demonstrates to lenders that you are a higher risk, meaning you’re less likely to be accepted, and even if you are approved, the costs are likely to be higher.
They could prevent you from getting a job
While not all employers investigate the financial histories of job applicants, different companies will have different screening processes, so what does and doesn’t get checked is a bit of a lottery. Some sectors, such as finance and legal, have strict guidelines as to who can be hired based on their financial status. Many police forces, for example, include a restriction where people in bankruptcy cannot join.
The logic behind these restrictions is that those in better financial positions are less likely to commit crimes such as money laundering or fraud. Having unpaid CCJs or debt defaults on your credit file is an indicator of poor financial standing or management, and could negatively affect your chances of securing positions in these sectors.
Makes it difficult to start your own business
Continuing from the previous point; having a large amount of personal debt can be a hinder if you try to start your own business. Unless you have sufficient capital reserves (which is unlikely, if you’re suffering from debt), business start-ups usually require some form of a loan. With unpaid court orders on your credit file, the scope of investments you can apply for will be limited. Even if you do get approved, it’s likely you won’t be able to borrow as much as you could if you were debt-free. Consequently, your scope in the new business would be severely constricted.
Having an unsatisfied CCJ on your credit file harms your credit rating. Consequently, applying for credit, and loans, whether for personal use or as start-up funds for a business, becomes more difficult. It will also make it harder to renew existing arrangements, and you could find yourself paying significantly more, or even having to change providers. You may even find it difficult to get a job in specific sectors where financial integrity is sought after. If you do have a CCJ filed against you, it would be best to either pay the amount specified, or challenge the order, and apply to have it set aside if you don’t feel you owe it.