Improving Your Credit Rating
The better your score, the more likely you are to get credit at the best rates. It is therefore essential you manage this information, so you appear in the most favourable light to potential lenders.
Credit reference agencies create credit reports from data supplied to them. They do not make decisions about credit applications – they just provide information to lenders who can act on this as they choose.
Check your credit report regularly
View your credit report regularly to make sure the information is as you expect
Look out for searches you do not recognise. Whether genuine or fraudulent, failed credit applications have a negative impact.
These organisations offer a free credit report service; useful as it shows you how much you owe to whom from borrowing. Note, while the service is free, you are served with ads matching your credit rating.
- Equifax – clearscore.com (free)
- Experian- experian.co.uk (free)
- TransUnion – creditkarma.co.uk (free)
- All Agencies – checkmyfile.com (free 30 trial, then monthly fee)
Make sure you’re on the electoral register
The electoral register is is used by lenders to help verify your identity. Still, it’s also crucial as the stability of residence in an indicator to the stability of other aspects of life. This is not a good thing for credit checks but can extend to any applications or vetting where the stability of circumstances are a factor.
Adult non-UK nationals should also register although they won’t be able to vote at the General Elections, they will be able to vote in local elections. So, even if you’ve no intent to vote – it better to be on the register.
If you are not on the electoral roll at your current address, it is advisable to register to vote.
Don’t miss payments
We’ll say that again. Don’t miss payments. That’s the big one. Lenders are looking for customers whom they are confident will pay back the loan without fuss. And; the best most reliable predictor of future behaviour is past behaviour.
All payments – both made and missed get recorded. When an account reaches 3-6 months in arrears – the creditor can mark it as being in default, a negative mark which remains on your report for six years. That’s the kiss of death for excellent credit rating.
If you want to end a contract where credit is involved, do not just cancel the direct debit and ignore it. You need to conclude your agreement with your supplier first; otherwise, attempted payments can fail and will appear on your credit report.
Close unused credit card accounts
Unused credit cards, especially with a high credit limit, you should be closed them. Open accounts where you’ve cut-up the card still need to be closed.
Lenders not only consider your current debt level but how much you could borrow on your credit cards. If you want to keep such cards, consider reducing the credit limit.
Be mindful of financial associations.
Be aware of to whom you are connected financially. This is not only anyone whom you’ve shared a bank account with but could extend to ex-flatmates through being jointly named on utility accounts such as gas and electricity.
You should terminate all old financial ties by closing all joint accounts and clearing all joint debts. If you think it is necessary, you can apply for a Notice of Disassociation to be added to your credit reports to explain you are no longer financially connected.
If there’s incorrect data on your file, you have the right to fix it.
For more information see Fixing Errors On Your Credit Report
Pay off debts subject to a court order as soon as you can
Court Judgements (CCJs) are recorded in the Register of Judgments which is a data source for credit reports.
- If you pay the debt within one month, it is removed from the register.
- If you pay later, but within 12 months, it is marked as satisfied but remains on the register.
Credit record will synchronise with this information within a month or so.
Explain the reasons for missed payments
Information on your credit report may be factually correct, but you may believe it unfairly impeds your ability to get credit. If so, you may be able to get it removed, or a note added to explain.
In the first instance, contact the creditor who supplied the information and ask them to have it removed.
If you keep getting declined – stop applying
Refused applications show-upon your credit report. The more searches made against you – the more likely you are a bad risk.
If you’re just browsing for quotes for a loan or credit card, make sure the lender or broker does a quotation search, not a credit search. The former is a soft search, the latter a hard search. Soft searches will appear on your file, only you, not lenders see them.