How to Improve Your Credit Rating
Reviewing Your Credit File
To improve your
Credit Rating, it is worth making sure everything is in order on
your credit files (or credit reports). You can do this online,
usually for a small fee of around £2, using one of the reference
agencies linked below.
Some points to consider:
- Check every detail, as you can be rejected for the simplest things, including outdated personal information on unused contracts.
- Keep an eye out for products that aren't yours, in case of ID fraud.
Your file states whether or not you are on the electoral register: make sure that you are! Lenders use the electoral roll to verify your name and address, so it is important that you have this first step sorted out. If you're a foreign national, or a citizen ineligible to vote, you can send proof of residency to the credit reference agencies and ask them to add a note of confirmation.
If anything on your file appears to be erroneous, you can write to the agency and ask that it be corrected. Corrections will usually be processed quickly, but sometimes you may need to talk to the company that originally filed the data. If a correction is refused, for whatever reason, you are entitled to add your own comments as a 'notice of correction'.
Steps To Improving Your Credit Rating
Here are some simple steps you can take to improve your Credit Rating (remember, it's not simply a fixed score, but varies from place to place depending on any number of factors - so small changes to your money habits could make a big difference):
Avoid a 'rejection spiral'. A string of rejections will damage your chances of getting a good loan, so if you aren't making progress, don't just keep applying in the hope that somebody will eventually lend to you. Ask the lender to do a quotation search as opposed to a credit search. Although many lenders will not be able to do this, it is worth a try as it will not have any negative affect upon your credit rating. Try to ensure that your application is realistic before you submit it, and make sure you are the kind of customer the lenders are after. This could mean playing their game, by building up a desirable credit history.
An effective but unpleasant way to do this is to apply for a store card or a credit card with a rate in the region of 30%, and begin to use it for purchases. Spend a little on these cards each month for around 6 months, repaying in full straight away so that you do not get crushed by the high interest rates. It will take time for your new credit history to gain momentum, but it will help prove to lenders that you are reliable and credit worthy.
It is important to give the impression of stability when seeking a loan. Simple details such as giving a landline number (as well as / instead of a mobile number) can help. If you are employed but know that you may soon be without work, make sure you apply for a loan while you still have a job.
Get rid of any harmful associations: cancel unused credit cards, debts or other accounts, and anything that could suggest the risk of excess borrowing. Lenders can investigate the financial status of the people connected to you, so if you are estranged from your family or partner, request 'disassociation' to avoid being linked with potentially negative information.
Leaving space between applications will create a better impression, not just for credit but for car insurance, mobile phones, and anything else that will leave a search on your file. Moving house is likely to disrupt loan applications. If you know that a move is imminent, apply early.
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