A stain on your credit history

Evidence of missed payments stays on your credit report for 36 months, while details of county court judgements (CCJ), bankruptcies or defaulted accounts will remain on your record for six years. If you were classed as a reckless bankrupt, the Bankruptcy Restriction Order would stay on your credit record for 15 years.

If you've got a CCJ, most high street lenders will give you the cold shoulder, although there are specialist lenders called sub-prime lenders that will lend you money but at a price. Being bankrupt or having an Individual Voluntary Arrangement on your credit record is bad news and will make it difficult for you to get credit.

Keeping your credit history squeaky clean is important because it ensures that you'll get the redit you want when you need it and at market price. It can help you get a job as well and some employers, especially financial firms, will only take you on if you have a good credit record. If you miss payments on a mortgage, prospective lenders will get concerned because mortgages are usually paid by direct debit or standing order.

If it's left unpaid, to them it means there's something wrong and that perhaps you have taken on too much debt. The size of the loan will also colour a lender's view. The larger the mortgage, the more likely they will think that you have taken on too much. Holding a joint bank account with someone else, or sharing a mortgage, will also affect your credit record. If your partner (business or otherwise) has a poor credit record, it could mean you'll get turn down for credit.

You have to be particularly careful about ex-partners - when you split up always update your credit report and make sure you close any joint accounts.

Peter Brookner of credit reference agency Experian says that there is really no excuse for not realising that you don't have enough funds in your account because it's so easy to check your bank account online. You can also make sure that you are not late with payments for credit cards and personal loans by setting up direct debits. If you set up a direct debit for the minimum payment on your credit card balance, it protects your credit record and ensures that you'll never get a late payment fee.

What to do if you don’t have the funds to pay If you know you haven't got the funds to pay - don't panic. Immediately contact your lender and explain the situation. In most cases, debt problems start occurring because of life-changing events such as divorce, bereavement, redundancy or illness.

Lenders are sympathetic in these cases and they will give you advice about rescheduling your debts to reduce the monthly payments. The worst thing you can do is start applying for several loans at a time, which can be so easy to do if you apply online. These applications show up on your credit record and lenders judge this as being desperate and that you are likely to have trouble meeting your commitments. The importance of your credit report Everyone in this country who is financially active has a credit record maintained by one or more of three major credit reference companies Equifax, Experian and CallCredit.

When you apply for credit, the lender will check your record before offering you credit. Basically, they are looking to see that you have a good track record of meeting your existing commitments and can you afford to take on debt. They want to make sure that you aren't bankrupt, that you don't have CCJs against you for non-payment of debts and that are not over indebted. The consumer debt mountain is at an all time high of £1.3 trillion and as it has grown, we have seen a growing number of people taking on ‘extreme’ debts – owing in excess of £100,000.

That's why lenders and credit reference agencies now share more financial information about us to make sure that individuals aren’t getting into too much debt, which can lead to extreme stress and misery.