If you have been searching for a loan or other financial product recently and have been unsuccessful, it is likely because you have a lower credit score than the lender will accept. Very few people have a perfect credit rating, but there are things you can do to improve yours. While there is no overnight fix for your credit rating, you can improve it over time and be able to get accepted for financial products in the future.
The first thing you need to do is to get a copy of your credit report from all the major credit reference agencies. You can order your statutory report for two pounds either online or in paper form from each agency, or you can join their online credit monitoring service. Both Experian and Equifax offer a one month free trial, so provided you remember to cancel them within the trial period, you can view your credit report free of charge.
Callcredit Ltd. offers unlimited access to your credit report free of charge on their Noddle website. Although they do charge for their credit monitoring services, these are optional extras. It is important to get a copy of your report from all the major reference agencies as different companies will use a different agency to run credit checks, and sometimes the information contained in them is different with each company.
Once you have copies of all of your credit reports, it is time to make sure that all the information on them is accurate, even the smallest mistake on your credit file could prevent you from obtaining credit. If you notice any mistakes, then you should phone the credit reference agency and ask them how it can be fixed. If it is a simple error, they may be able to fix it over the phone for you, but if it is a mistake made by another company reporting to your file, then you may have to get in contact with them; the credit reference agency should be able to advise you on this.
Once you have made sure that all the information on your file is correct, then it is time to think about how to improve your credit rating. There are many things that affect your rating and every lender will have different criteria for deciding whether to lend to you, so your credit score is not all lenders will be looking at. They will also want to check if you are on the electoral register at your current address. If you are not on the register, not only will you not be able to vote, but lenders might not be able to verify your identity and may not lend to you because of this. Being on the electoral register is one of the most important things you can do to improve your credit rating, and it is not difficult for you to do. If you go to the about my vote website, then you will be able to get the information you need to place your name on the electoral register.
Lenders may also look at the credit files of any person that you are financially associated with. This means any person with whom you hold or have held joint accounts with. If you no longer share accounts with a particular person, you can ask for the financial association to be removed from your credit file. To do this, you will need to fill in a notice of disassociation. Again, the credit reference agencies themselves can advise you on their particular policy for doing this.
If you have any county court judgements (CCJ) or defaults on your credit file, then this will of course lower your credit rating. CCJ’s and defaults will remain on your file for six years, so it really is best to avoid them at all costs, but if you already have one or more, then you really do need to do anything you can to improve your credit rating. You may not be able to obtain credit from mainstream lenders if you have CCJ’s or defaults, but there are lenders who specialise in lending to people just like you.
You may be able to get a credit card with a low limit from a company specialising in high risk lending if you are make sure that you use it responsibly. These high-risk cards often come with really high interest rates, so it is best not to use them for big purchases. Instead, if you do get one of these cards, try to use it only for a small purchase every month, then pay the balance off in full when the bill arrives. By doing this, you will improve your credit rating by using your card and maintaining a perfect payment history with it.
If you have old accounts that you no longer use, it might be best to close some of them down. Most lenders don’t like to see a lot of available credit as the risk to them is that you could go and spend all of your available credit and then not be able to afford the repayments. It is worth remembering though, that lenders do like to see accounts with a long history so perhaps if you have some old, unused accounts, it may be a good idea to keep one open and start using it for small purchases, paying off the balance in full each month. This will show lenders that you are able to maintain an account over a long period, but won’t give you so much available credit that the lender is put off.
If you have any outstanding debts, then you should do your best to pay them off before trying to obtain more credit, as lenders will take into account the amount of debt you already have when deciding if they are going to lend to you. If you have a large amount of debt, a lender may feel that you would not be able to afford to have any more and refuse to lend to you on that basis.
Another thing that lenders look at when deciding whether to lend to you is the amount of credit applications you have made recently. Although a lender is not able to see if you were accepted or declined for credit, they are able to see any other searches that have been made. If you have made a lot of applications recently, a lender may assume that you have been turned down and refuse to lend to you on that basis. Or they may think that you are desperate to obtain credit for some reason and are trying everywhere to get it. This could lead them to assume that you are in financial difficulty and need the credit desperately; this makes you a credit risk.
Having a less than perfect credit rating may be preventing you from obtaining credit. While there is no overnight fix, there are things you can do to improve your credit rating. Unfortunately, this is often a slow process, but over time you should see your rating improving and hopefully you will be able to obtain credit again soon.