Your credit rating affects far more than you think. It doesn’t just dictate your ability to obtain a loan or credit card. It also affects some major financial areas, such as mortgage application, utility contract and mobile contract.
Life can sometimes put people in a position where they find themselves in debt through no fault of their own due to redundancies or other extenuating circumstances. If you have ended up in more debt than you planned and your credit rating has been affected as a result, there are ways to build up your credit rating again, giving you better chance of consolidating your debt and beginning your journey towards financial freedom. For those with no debts, whilst you are to be applauded for your discipline, having little or no credit history can also work against you when trying to apply for a mortgage or credit card. The company you apply to will find it difficult to predict your future behaviour in relation to debt as there is no information to refer to in your past, thereby making predictions on your ability to pay more difficult.
Below are some tips on how to improve your credit rating:
1. Be consistent and timely in your repayments
Pay your monthly instalments off on time and every month. Even if you are struggling, try not to pay late or miss your payments. An easy way to ensure that you do not miss your payments or pay late, is to set up a direct debit. If you are in a position to pay more than your minimum payment, do this, you will end up paying less interest at the end of your loan term. Better still, if you can pay off your credit card debt every month, this will go a long way towards improving your credit rating and showing lenders that you are a responsible borrower.
2. Make sure you are on the electoral role at your current address.
If you are not on the electoral roll, you are not just unable to vote in the upcoming General Election, you might find it challenging to be approved credit when you apply. So sign up now! You can apply at any time at https://www.gov.uk/register-to-vote. If you are unsure whether you are already on the electoral roll or not, you can just go to https://www.registertovote.service.gov.uk/register-to-vote/local-authority/lookup, enter your postcode to find your local electoral registration office and contact them directly.
3. Do not make too many applications for credit in one go.
This will show up on your credit file. Too many applications, especially in a short space of time, may make you appear desperate and result in rejections.
4. Check your file with credit reference agencies
It is important to check your credit reference files with at least two of the big credit reference agencies, such as Callcredit, Equifax and Experian, as different lenders use different agencies. The information held by the different agencies might be different to each other. Go through them to ensure that there are no errors on there that can affect your credit rating such as other people’s debts. You can request a copy of your file for £2.
5. When you apply for credit, find out whether a “soft search” can be carried out initially. A soft search is normally an initial quotation. It is visible on your credit report, but it does not affect your credit rating and potential lenders will not see the soft inquiries on your credit report. This allows you to make inquiries without hurting your credit rating. It is a good way to decide whether you want to pursue the credit or not, without leaving a foot print on your credit history.
Disclaimer: The above information does not replace financial advice. Please ensure you seek independent financial advice before making any decisions regarding your finances. We also recommend that you carry out your own research to ensure that this is right for your own unique circumstances. Please note that we sometimes link to other websites but we cannot be held responsible for their content.