How to Improve your Credit Rating

Your credit score is what helps lenders come to a decision on what offer to put on the table for you.

If you want the best loan, mortgage, credit card or even phone contract then having a high credit score is something you’ll need.

Why does a bad credit rating go against you?

A bad credit rating can shorten the list of your borrowing options. County Court Judgments (CCJ’s), bankruptcy orders and defaulted payments all leave a black stamp against your name whilst you look for credit varying from as big as a mortgage to as little as a phone contract.

Missing payments on your energy bills, credit cards or other payments in that area can result in you getting a mark next to your name for future reference and this could come back to cause you problems.

Collecting credit footprint after credit footprint can also make matters worse you can receive credit footprints when applying from credit cards so if a company turns you down its best not to go right ahead and apply with other companies. We always advise you to do your research on the best credit card for yourself instead of just applying for the last thing you heard of on the radio or the TV. You can also use such sites as www.moneyexpert.co.uk To find out the best rates on credit cards at the current time.

Usually, if holding a poor credit score the only type of credit available for borrowers is through what’s known as the sub-prime market, where lenders tend to charge the borrowers high rates of interest to lower the risk they’re putting up on themselves.

How to improve your credit score?

There are some simple steps you can take to increasing your credit rating:

• Be sure that all of your debts are registered under your correct name and current home address .

• Make sure that your file is completely mistake free, i.e. other people’s debts and payments.

• Only apply for credit you are likely to get, asking for a rate first before having them do a credit search, ask the lender to only do a ‘quotation search’.

• Do everything you can to keep up to date with your agreed repayments such as setting up your direct debits and also if you’re finding it too difficult to keep up with the payments ask if you can have smaller repayments extended over a longer period of time.

• Prove to lenders that you’re a responsible borrower, you can do this by taking out a credit card which you may have to take on a high interest rate but just use a small amount each month being sure you can clear the balance off full at the end of each month so you don’t get hit with the high interest rate. You will need to do this for at least 6 months.

• Close down any credit agreements that are no longer live.

• Register for the electoral roll from your home address.

• If you have a joint finance with somebody with a bad rate this will effect your credit rating. So if you split from this person be sure to inform and let the debt agencies know you’re no longer in joint finance with that person.

Things lenders look for on application forms:

– Long term employment history.

– Monthly Expenditure and outgoings

– Long time living in one place, own a home instead of renting one, long-term record from the same bank.

Data protection

Under the Data Protection Act if a lender refuses you credit they must state why if your credit scores were used to help the lender come to that decision. If so, you’re able to ask for a review of your application, giving you chance to look over your rating and pin point what areas you need work on building up towards a higher credit rating. This also gives you a good chance to point out if there are any mistakes that are on your record and get them corrected and looked over.

It isn’t the end of the world if your rating isn’t strong, although it may take time and patience to repair, details on bankruptcy will stay on your record for up to six years but for the minor problems it should only take up to a year to get yourself back up to a healthy rating if you have a steady year of good credit habits.

Faulty information

If you notice any of your information is wrong then you simply need to contact the credit agency to inform them. Let them know which details are incorrect and ensure that it is all the correct information.

Where can I start on getting my credit rating back to full health? 

First and most important, make sure you’re making the payments to creditors on time, if you’re unable to make a payment then be sure to contact your creditor explaining this and come to an agreement to make the payment the following month, if you have any outstanding defaults then pay them off.

You should contact a credit reference agency such as Experian and obtain your credit history from them so you can look through and make sure all is correct and up to date.

If a bankruptcy order is annulled make sure that a copy of the discharge or annulment is sent to the credit agencies.

Reference agencies also give people the chance to explain why they may have had a period of bad credit performance, consumers may attach a notice of correction on their credit report to explain why they have failed to make past payments on time.

Some lenders will search your credit report multiple times during a single application if so then you should then alert credit reference agencies.

Being on the electoral roll correctly is essential, something as little as a mix up in the house number can cause you serious problems, people can often find that simple measures such as filing out credit reports correctly or making sure you’re on the electoral roll will give you a nice jump for your rating.