How to Improve Your Credit Rating

How to Improve Your Credit Rating

Been denied credit and wondering what on earth is going on?

Our credit rating is a simple 3-digit number that represents our credit worthiness. In other words, it signifies our capacity to manage more debt right now. This is a crucial factor in determining whether you are successful in getting more credit for things like buying a home, car, or even a contract mobile phone. Below are some positive steps you can take to ensure that your score is as strong as possible. It is all about making sure that everything is correct and up-to-date. You need to check your Free Credit Report regularly to see how much your credit rating has improved along the way, but after 6 months you should see a marked improvement if any of these factors were not already sorted.

Simple steps to help improve your credit rating:

1. If you are rejected for credit do not simply keep applying

Instead, speak with the lender and find out why they rejected you and check your credit report to see what is dragging down your credit score. Multiple applications creates multiple searches on your credit file, which looks desperate and will likely hurt your credit score. Not good. If a credit reference agency influenced the decision, the lender has to tell which ones was involved (Experian, Equifax or Callcredit). Then check your credit report.

2. Always pay your current financial arrangements on time

Absolutely never pay late. It's such a simple thing and yet people do it all the time. If you can pay debts off early do so, use direct debits or standing orders, to encourage punctual payments.

3. Make sure you are on the electoral roll at your current home address

Contact your local council to register for this. It's really very simple to do, demonstrates stability and acts as a passive identity verification. This government website will help you register to vote If you are have just moved this is something everyone has to do, and if you are about to move, make credit applications before you move (as you will be on the electoral roll at your current address, but can take a while to update when you move).

4. Never use more than 60% of your credit card limit

In addition to this, don't automatically accept limit raises either. Your capacity to service debt is finite, and other lenders know this. If you have a £10,000 limit on a card, and your perceived maximum is also £10,000, you simply will not get anything else approved. This is a problem, as a credit card with better interest rates is not a possibility. If you only use £2,000 of your limit, ask the provider to reduce your limit to £3,500 (just over 40% above your useage) and stick with that. This leaves room for other possibilities. After a while you should be able to apply for other products with better interest rates, and transfer your debt. 

5. Avoid CCJ’s like the plague

Count Court Judgements seriously damage your credit score. It's a simple as that. If you have a CCJ, try to pay it within one calendar month and then it will be removed from your credit report. If it is paid in full make sure it is shown as satisfied on your credit report.

6. End financial associations that negatively impact you

For example if you have split from a partner, and your partner has a poor credit rating and is connected to you through a joint application such as a joint bank account, contact the relevant credit agencies for a dissociation form.

7. Check your credit report regularly

Query any irregular information with the relevant lender, set-up alerts related to your credit report, which updates via email of any changes to your credit report. For example an application made with your details but not by yourself, alerts you to identity fraud early.

8. Use notices of corrections

These are little notes you can add to your credit report to explain any legitimate issues, and provide additional context for lenders. They do read them. For example if you were late with certain payments, due to redundancy or a divorce, a lender will often take these into consideration. Sometimes there are ugly spots on your credit file, take the opportunity to explain, it's the only opportunity you get.

9. Don't automatically close down accounts with alot of payment history

Often there is advice saying that consumers should close down all credit accounts not being used, but if you have an account for example credit card or current account, with years of good payment history, it may not makes sense (at least while applying for other credit) to close this down. This shows lenders what they want, which is a consistent payment record.

If you can honestly say that all of this is in order, then your credit score will be pretty good. If you have applied for credit and have been turned down, you should defintely check your credit report as there could be something more sinister going on. Peace of mind, and you get 30 days free.

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