How To Improve Your Credit Rating
Rebuild your credit score...
If you have had difficulty applying for credit because you have a poor credit history, then it is about time you started thinking about how to improve your credit rating.
A bad credit history can be caused by:
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Missing payments or bills
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Getting into arrears with your debts
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Having CCJs (county court judgements)
When you apply for credit, the provider will do a credit check or 'credit scoring' on you to see how 'creditworthy' you are - i.e. whether or not you are likely to be a good borrower and keep up with payments. A bad credit score can mean getting rejected when you apply for any credit, such as credit cards or loans, or having to settle for uncompetitive deals even if you are successful in an application.
But all is not lost - there is a whole host of things you can do in order to repair your credit score, apply for credit, and get more competitive rates. Firstly, get a FREE credit report, so you can see what lenders are seeing, and then work on trying to improve it.
The different ways of improving your credit rating include:
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Ensure you are on the electoral roll
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Do not default on repayments or pay them late
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Spread out your applications for credit – many credit searches in a short space of time can damage your score
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Make important applications before moving house as this can disrupt your score
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If you only want a quote, not an application, then ask for a 'quotation search' instead of a 'credit search' as this will show up on your report
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If you think it's unlikely you'll be accepted for credit, don't apply, as rejections damage you score
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Homeowners rather than renters and the employed rather than self employed people generally score higher
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Having a fixed home phone rather than just a mobile can improve your score
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If you are rejected because of an error, get it sorted before applying again or else risk damaging your status with repeated credit searches
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Cancel unused credit cards, debts and accounts
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If you part ways with your partner, write to the credit reference agencies and ask for a notice of disassociation to prevent their future credit blunders affecting you
What to do if you have been refused credit
If you have been refused credit from a mainstream lender, either because you have no credit history or have a damaged one, then you might have to apply for a loan or credit card with a high rate, which can be as much as 30%. There are specialist companies which offer these. Providing you spend a little each month then pay off the balance in full each time and keep up with the repayments, you will not incur interest charges and can use your effective management of the credit to build up a good credit score. You should then be able to apply for mainstream credit, offering more competitive rates.
If you have been rejected for credit which is designed especially for those with a poor credit history, there are prepaid credit cards which you have to load with cash before spending – they have no credit checks, but only if you have little other option should you use these to help you to rebuild your credit, as they usually charge a fee.
It might take a while to rebuild your credit score, but with time and patience you will be able to apply for more competitive deals and save on interest for a range of credit, such as mortgages, loans, and credit cards.
Many people are finding it particularly difficult to make ends meet as the global credit crisis effects mortgage rates, energy bills and food costs. It might be proving difficult to rebuild your credit rating if you are continually going into arrears and damaging it further. Protect yourself from some of its effects with our Top Tips on how to Beat the Credit Crisis.
For FREE and impartial debt advice, fill in the debt advice enquiry form and a qualified advisor will assess your individual sitaution and call you back to help you work out the best course of action.