A Guide to Improving Your Credit Score
What You Need to Know
- Check the information on your credit file. It’s easy to obtain a copy of your file from companies such as Credit Expert or Experian and, if information is wrong, you can add notes to correct it. Wrong information may lead to you being judged on someone else’s credit score!
- Get on the electoral roll. All you have to do is register with your council and it will give your credit score a boost. Lenders love the electoral roll as it helps them validate your identity and other facts about you.
- Keep ‘correction notices’ brief and factual. You don’t want to put lenders off by covering your credit file in rants explaining disputed pieces of information.
- Close down credit sources you are not using. These still count towards the amount of credit you have available to you and a lender will be put off if the amount is too high.
- If you’ve never had credit before, lenders will have no way of knowing if you’re reliable. Take out a credit card. If you only spend small amounts and clear the balance monthly you’ll avoid paying interest and raise your credit score.
- Be aware that if you have a joint account or loan with somebody else your credit files become ‘tagged’ to each other. This can boost your credit score if they have a good track record, or bring it down if they have poor credit.
- If possible have a landline installed. Many people are turned down for credit on the basis of not having a landline, indeed, very few people realise it is a lending criteria that many companies use.
All of us, at one point or another, will find ourselves needing to borrow money. Whether it’s just a bit of extra for a new suit, or a long term commitment like a mortgage, attaining credit can be vital in helping steer your life plans along. Being refused credit can place a massive obstacle in the way of those plans.
So, how can you avoid this happening to you? The most effective way is to ensure that you have a healthy credit score and that your credit file is in good order. Fortunately, if you know how, boosting your credit score can be extremely easy. Here’s our run down of some of the best ways to make your self a lender’s dream.
Check Out Your Own Credit File
All most all applications for credit will involve you being credit checked. This means the lender will look at your credit file and make judgements about your past dealings. If they see something they don’t like, they’ll reject your application (which will only worsen your credit score.) The solution is simple. Check yourself before they do.
Accessing your credit file is very easy and, under the Consumer Credit Act of 1974, you have a legal right to see a print out of it for a cost of just £2. This can be acquired from many companies such as Credit Expert, Experian and Equifax who have information on every financially active adult in the country.
The file is made up of three areas; your personal information (address etc), public information about you (the electoral roll etc) and you financial history. Factors in all three areas can have a surprisingly big impact on your credit score, so it’s vital you get hold of a copy and check your information is correct.
Remember to keep checking regularly as your file will change over time.
Keep Personal Details up to Date
One of the absolute top tips for boosting your credit score is to get on the electoral roll. Simply register with your council, or do it on line here. Doing this makes it easier for lenders to confirm your identity and other facts about you and generally paints you as a more stable sort of person. Credit reference agencies update their details form the electoral roll on a monthly basis, so getting registered can bolster your credit score, quickly.
If you’ve moved around a lot, it is vital to ensure that your address is up to date. Failure to do this could lead to you being judged on someone else’s financial history.
If there is any incorrect information you should amend it. Credit reference agencies recommend you to add a ‘notice of correction’ anywhere on you file where a piece of information is disputed. Limit yourself to 200 hundred words and make it brief and factual. If you have to many notices, or if they read like rants you’ll only put lenders off, as they are legally obliged to read them.
Managing Your Financial Profile
Having had too much or too little credit in the past can affect how lenders will see you. When lenders look at your financial information they take into account how much credit you already have available to you. If this amount is high, they may decide not to give you any more. Therefore, there is no point having access to credit you are not using. Close down any credit cards or accounts you don’t use.
On the other hand, it can be as much of a problem if you’ve had no credit in the past, as there is no evidence to prove you’re good at managing it. This problem is very common for young adults who have had never needed any form of credit before.
One great way of getting around this is to take out a credit card or a supermarket rewards card. Only spending small amounts that you can pay off monthly will not incur interest and, gradually, you’ll build up your credit score (not to mention your reward points!)
Another way to build your score is to get accepted for a loan. If you have your eye on something for which you will require a large loan in the future, you can plan ahead by taking out smaller, easier to acquire loans beforehand. Provided that you pay them off, this will be a very encouraging sign to future lenders.
Having a joint bank account or applying for a loan with someone else causes your credit file to be ‘tagged’ with theirs. Furthermore, this tag will remain on file even after your arrangement together has finished. This can play to your advantage. For example if you are a young person with no credit history you can link your file to that of somebody with a good track record. This will reflect well on you and help you attain credit.
Likewise, if you have a poor credit score due to past actions, you can boost it by being linked to some with a good track record. Your association with them makes you less of a risk as it is likely, due to your close relationship with each other, that they will help you keep on top of things.
However, to do this you must share an address. It is also worth remembering that being linked to somebody with a bad credit history will be detrimental to you. Check to see who you are linked to and be sure to have ex-partners and friends removed from your file. It is very common for these links to cause credit problems well after a relationship has ended.
Avoid Getting Marks on Your File
Marks against you do not leave you file quickly. A CCJ or a default notice will be on your file for six years after you receive them and bankruptcy will count against you for an entire decade. Whilst missed payments are less serious they stay on file for three years. Given how long term these marks are, taking the time to forward plan how to avoid them is well worth it.
For example, if you know you’re going to miss a payment, cancel the standing order and call the company to see if you can arrange another date. Often they will be flexible and, if you pay on the date agreed, there’s a good chance they won’t count it as a missed payment.
If you do miss a payment and then go on to close the account, this will stay on record for a further six years, so, in the long term, it is often worth keeping the account open until the three years has passed.
Whenever you are credit checked a ‘footprint’ is left on your file. This gives lenders a reasonable idea of how much credit you’ve been applying for recently. Seeing a lot of footprints will put a lender off as it looks as if you’re on a credit binge, out get finance from any available source.
Therefore, if you are rejected for a loan, continuing to apply and getting rejected will just make things worse. Leave it for a while. Companies are strongly advised to point out what it was on your credit file that they didn’t like. Find out about it and focus on fixing it. If you still need the credit some “sub-prime” lenders, aimed at people with a poor credit history, will lend without credit checking, normally at astronomical interest.
Lenders love stability. Some of the things they look for are; a long time in the same job, a long time at the same address (electoral role registered) and a long time with the same bank.
Whilst, obviously, it is not always possible to avoid changing such things there are also some easier ways to make your self appear more stable. One great tip is to ensure you have a landline. Lenders see landlines as a big positive and, often, having one is a lending criteria.
- Information on the electoral role.
- If credit is a problem check out these alternative ways to borrow.
- Information on how your associate's debts might effect your credit.
- Learn more about the history of credit "black marks" with our guide.