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Author: Infinity Man

Article source: http://www.articledeshboard.com/. Used with author's permission.

Most if not all finance companies will register your loan with a credit reference agency once you have taken the loan out. It doesn’t matter if it’s for a personal loan, hire purchase, car finance or secured loan; they are all registered on the data files and sent off.
Each month the finance company needs to send the records back to the credit reference agency and update the current status of each account they have on file. This is done electronically and usually fazed in batches over the month, if it’s a large finance entity; monthly if it’s a smaller company.

When you fall past due, it will not show immediately that you are one month in arrears on your credit file. You will have approximately three weeks before you run the risk of your credit file showing a full one payment in arrears, or as the credit reference agency states “One down”. Certainly after four weeks you will be at the critical point of the account showing a level of deterioration. Obviously once it shows “one down” you will need to bring the account up to date as soon as possible otherwise your credit file will be impaired for the future. Making the payment will in turn ensure that your credit file is then updated on the next "batch". However, you should remember that the historical payment history remains, so you will always be seen and shown as being one down in that month from the credit reference agency. Whilst that’s not so good, it’s important to stress that if the current status of the account is up to date and there’s only minimal "one downs" showing, this shouldn’t be a problem to your credit rating.

If you’re looking to obtain things like credit for vehicle or just a personal loan and your more than one down, you will immediately struggle, this is because the underwriters will think that you are currently experiencing credit problems, as your account has just gone one down and probably reject your car finance application. Rejected finance applicants will need to contact more "open minded" lenders, classed as sub-prime.
Subprime lenders not only lend to higher credit risk people, they also lend in the niche areas where typical lenders steer clear. These cover applicants with seasonal income, such as farmers, people who do not receive verifiable income, such as cash in hand occupations (taxi drivers, casual labour etc.). Getting back to the subject at hand, it’s interesting to see the difference in being one down with a standard finance company and that of a subprime company.

A standard finance company will send you a couple of letters asking politely for your payment and eventually you might get a phone call asking for the payment after a few weeks. A subprime company will be onto you like a rash. You may receive one letter asking for payment, but after this you’re more than likely to be hit with numerous phone calls at home, work and mobile. The point to remember here is that they don’t wait for your account to show in arrears with the credit agency, they will start when your payment has just fallen due, just a few days after the due date.

Infinity Man works for a progressive car finance company in the UK. Throughout this time, he has spent many years working at all levels within finance organisations. The differing organisations included a guaranteed car loan lending plan as well as a prime auto plan and various similar lending criteria in between for consumers.