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How to repair your credit rating
Getting a decent credit record can save you some serious cash in the long run. After all, the better your credit score, the more likely it is that you’ll be accepted for the best mortgages and credit cards.
So how do you go about making sure your rating is as good as possible? Just follow these steps.
#1 Actually get some credit!
“I’ve never had credit so my credit record is perfect.”
It’s an easy assumption to make but it’s not exactly true. A lender wants to see how you’ve managed your debt in the past in order to work out how you’ll fare in the future. If you have no credit history for them to go over, it’s harder for them to make that prediction.
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#2 Check your credit record!
How can you know how good your credit record is without checking it?
Besides, giving your credit record the once over gives you an opportunity to pick up on any mistakes that need correcting, particularly things like accounts being registered to the wrong address.
You can get a free 30-day trial of Experian's CreditExpert service, so you can make sure your record says what it should do!
#3 Set up a direct debit
The easiest way to get a black mark on your credit record is to miss a payment, whether it’s on your credit card or your mobile phone bill. And those missed payments stay on your record for years, so they can be a big deal.
Set up a direct debit, even if it’s only for the minimum payment. That way, you’ll never miss a payment again.
#4 Get on the electoral roll
One of the ways a lender determines that you are who you say you are is by checking your registered address against the electoral roll. If you don’t show up, it’s a warning sign that something may be amiss.
It’s a dead easy thing to do, so don’t let it be the reason you get turned down. Head over to About My Vote and you can register to vote to no time.
#5 Get rid of unused credit cards
When a lender assesses you for a credit card, one thing they look at is how much credit is already at your disposal. Sure, you’re handling paying off the £500 or so on your main credit card just fine every month, but what if you also have two old credit cards that you don’t use any more at the back of the drawer? You’d have thousands of pounds of credit at your disposal – would a lender want to add to that?
The simple way to address that is to close the old, unused accounts.
That said, it doesn't always work like that. According to CreditExpert, some lenders look at 'card utilisation' – essentially how much of your credit limit you're using. And if you're only using a small percentage of that limit, they may score you more highly as they see this as good management of your credit. Other boosts include having high credit limits elsewhere (as that means other lenders trust you) as well as having had certain products for a long time (as this suggests you are a stable candidate).
#6 Don’t keep applying!
Applying for a lot of credit over a short period of time is a big no-no. Put yourself in a lender’s shoes – if they have an applicant who has already applied for three different credit cards in the last six months, that borrower is going to look pretty desperate aren’t they? Would you want to lend to them?
Pick out one credit card that you want and apply for that. If you do get rejected, don’t just head straight off to apply for another! Find out why you were turned down, take steps to address the problem, and then start looking for an alternative card.
#7 Don’t let your someone else’s mistakes hurt your score
When I look at my credit record, it flags up that I am ‘financially linked’ to my wife. However, we aren’t linked simply because we are married – it’s because we have joint accounts and a mortgage in both of our names.
As a result, the way she handles credit has an impact on my credit score.
So if your partner has a had a few credit hiccups along the way, try to keep your finances separate – that way you will still have access to decent credit deals.
And should you split up, make sure you ask the credit reference agencies for a notice of disassociation. The last thing you need is your ex scuppering your credit score!
#8 Keep things stable
Again, put yourself in the lender’s shoes. The more stable you appear, the more attractive you become as a borrower. Moving house a lot, frequently changing employer and bank account – these things can raise red flags against your application.
#9 Add a notice of correction
You check your credit record with one of the main credit agencies and find there is a record of a missed payment or debt default which isn’t correct.
You can complain to the lender and the Financial Ombudsman Service, or you can ask the credit reference agency to contact the bank on your behalf to query the mistake.
Your final option is to add a 220-word statement to your record to explain exactly what happened: a notice of correction.
You need to contact the credit agency to add this to your report, and it means that this statement will be flagged up any time you apply for credit.
#10 Consider a credit card for borrowers with bad credit
So your credit history is a bit patchy and the big name lenders don’t want anything to do with you. That doesn’t mean that credit is completely out of reach. There are a number of credit cards specifically designed for borrowers with a poor credit history.
[Compare credit cards for people with poor credit histories]
