New Year, New Start: How to improve your credit rating

January is traditionally the time of year we look to make changes in our lives. From losing weight, getting fitter or eating healthier.

But what if this year your goal is to improve your credit rating? It can be a minefield of information. Every lender has their own specific requirements and contrary to popular belief there is no such thing as a “Blacklist”.

Here are a few simple steps to start improving your credit score and get taken seriously by lenders when applying for credit.

check

Check your credit file for any mistakes

Sounds simple right? But if there is any sort of mistakes on your credit file you will most probably be turned down by lenders. For instance, a letting agency I used in one of my previous addresses had spelt my name wrong when registering me for council tax at the property. I got turned down left, right and centre until I noticed and rectified the mistake. Once sorted, I had no further issues. There are three main credit reference agencies I would recommend you check:

If you do spot any mistakes, challenge them by complaining to the credit reference agency. They have 28 days to remove the information or tell you why they don’t agree with you. During that time the ‘mistake’ will be marked as ‘disputed information’ and lenders aren’t allowed to rely on it when assessing your credit rating.

How to improve your credit rating – things you can do now

  • Stop applying for credit until you have ironed out any issues on your credit file and improved your credit score.
  • Get on the electoral register. If your name is not on there the likelihood of you obtaining credit is slim to none. Register online or by post.
  • Cancel unused credit cards. This will also reduce the risk of falling victim to fraud if they were to be stolen.

How to improve your credit rating in the longer term

If you have had previous debt, you need to show lenders that you are a responsible borrower. In time, this will improve your credit score.

Pay on time

Pay your bills on time and if possible settle credit accounts early. This will show you are sensible borrower.

credit builder

Use a Credit-builder Prepaid Card

Some prepaid cards have a credit building facility attached to them. It is a great way to help build your credit rating without running the risk of racking up any unnecessary debt. You are “loaned” between £60 and  £120 by the prepaid company. This is essentially just your account fees paid upfront for the year. Every time you pay your monthly fee of £5-£10 you have paid a portion of this loan back.

At the end of the year, providing you have kept up with all your payments, this will be recorded on to your credit report as 12 months of successful repayments.

Please bear in mind when considering this as an option, it is a real credit agreement and if you don’t stick to the 12 repayments over the year it can also have a negative impact on your credit score.

Credit-builder credit cards

There are credit building credit cards available if you have a poor or no credit history.

Be aware that they come with very high interest rates, and if you go down this route you need to pay off whatever you spend in the same month to avoid having interest rates added to your monthly bill. Otherwise you’ll get into debt that you may potentially struggle to pay off, reducing your credit score even further. Credit limits on these cards are typically low.

Caution

Stay away from expensive credit repair companies

These type pf companies claim to be able to repair your credit score. Most of them simply negotiate with companies who have sort County Court Judgements (or decrees in Scotland) against you.

Others may claim they can do things – legally they can’t, and some may try to encourage you to lie to credit reference agencies.

They charge a small fortune so DON’T consider using such firms. There is no reason that you cannot improve your credit rating yourself so don’t pay someone else to do it!

 

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