How to Improve Your Credit Score
How to improve your credit score
How to improve your credit score
You’re having trouble getting credit… well, isn’t that the way of the world just right now? But there are ways of making sure that if they are handing out credit you stand as good, if not better, chance of getting your hands on it than anyone else.
Firstly, remember that financial institutions, including the banks, are there to make a profit, NOT to help you. Once you’ve got your head around that fact, then you can start to improve your credit rating so you can get what you want when you want it.
• Do get your credit files from the three main agencies. Get their details from their websites – Equifax (www.equifax.co.uk), Experian (www.experian.co.uk) and Callcredit (www.callcredit.co.uk) – and send each of them a £2 cheque, asking for your credit file and giving all your current and previous names and addresses. You can also get it over the internet but it tends to cost you more and they will invariably try and sell you some related product that you don’t need or want.
• Make sure your credit file is bang up to date. Ensure you have notified the credit rating agencies of any changes in circumstances or if you want it known that you are no longer financially linked with someone. There’s space allocated to this kind of statement on your credit records and anyone asking for a credit check is obliged to read it. If you need to make a statement, don’t get bogged down in detail or emotion: keep it simple, factual, and to the point.
• Have a little debt. If you have no credit history, get some, because otherwise lenders have nothing to judge you on. If you have problems getting credit, start small, perhaps with a store card or high-interest card and make sure you only spend a small amount each month (and clear it), and then apply again for a lower-interest card once you have six months of good credit behaviour under your belt.
• Cultivate stability. Try to avoid changing everything at once, such as home, job, bank account, etc, as too much change all together makes you appear unreliable. If things are about to change, such as you are pregnant, looking for a new job, moving house or going travelling, then try and spread the changes out over a period if you can or apply for credit before it all kicks off. A landline on applications is better than a mobile, and make sure you’re correctly listed on the electoral role by writing to your local council or going on line to amend your details instantly at www.eroll.co.uk.
• Minimise mistakes. If you have a CCJ that has been settled, for example, make sure this is noted on all three of your credit files. If you‘ve settled an outstanding debt, and your credit score still lists it as active, make sure you write and tell the agency to amend their records. Sometimes they will need to go and check with the financial institution, which can mean you have wait a month or so, but often it’ll be updated within a week or so.
• Avoid future mistakes. Don’t ever miss a payment on your credit cards and always pay your Council Tax. If you are threatened with a CCJ, act quickly to get it sorted before it gets to court.
• Don’t go to a credit repair firm. They will charge you a fee or commission for nothing because there is nothing they can do that you can’t do for yourself for FREE. And unfortunately some suggest actions that may be dodgy or downright illegal, such as perjuring yourself by swearing that you never had a CCJ and then trying to obtain credit for you in the interim while it is being queried. This kind of thing is never worth it, because the truth will always come out in the end and it will just make a bad situation much, much worse. If you have bad debt, contact a free debt counselling company, such as the Consumer Credit Counselling Service (www.cccs.co.uk) or the Citizens Advice Bureau (www.citizensadvice.org.uk), who will be able to help you sort things out for free.
• Play the game. Make regular payments of at least the minimum charge every month and a little more if you can manage it. However, don’t pay off balances in full every month. They are in this to make a profit. If you don’t let them do so then they are not likely to want to offer you large amounts of credit in the future.
• Don’t look desperate. If you are applying for a new card or loan, don’t scatter out a load of applications willy nilly as all of these will do a check on you, and each check leaves a ‘footprint’ on your file (you getting your own credit file doesn’t leave a footprint, by the way), and too many in a short space of time flags you up as desperate and, therefore, a bad risk. If you aren’t likely to go for a product, then don’t apply, and if you want to compare rates or costs, either ask them for a quote (not all will, but the numbers who will are increasing), go to an independent financial adviser (check for one locally on www.unbiased.com), or do some research another way (see below).
• Be reasonable. If you know you are not very credit worthy, don’t apply for the sexiest product in the market, cross your fingers and hope because all that will do is 1) get a search footprint on your credit file for no reason, since you are likely to be turned down, and 2) mean that if you do get offered one their products, you’ll probably end up paying through the nose for it. Much better to have a look around, ask people with a similar credit history to yours if they can recommend anything or get on the chat room at financial sites, such as www.motleyfool.co.uk if you don’t know anyone in a similar position. You can post anonymously.
• Cancel any unused cards. If you have five credit cards, even though you only use one and the rest have been cut up or shoved in the back of a drawer, then you will look as if you have a lot of credit available, which will raise questions about 1) how you are going to service all this debt and 2) why you need more. So if you aren’t using cards, cancel them – but not all at once, because otherwise that’ll show up as a ‘desperate’ measure as well!
• Fly solo. Marriage isn’t particularly dangerous, but sharing finances can be. If you have ever been financially linked to another person, even if only through a shared bills account or on a shared tenancy, then make sure that there is a note on your credit files stating that you are no longer linked to this person, because if they have bad credit, then this will recorded on your file too.
© Claire Burdett. Please only reproduce this article with permission, in its entirety and with a hyperlink to www.claireburdett.com. Thank you.
First published in Citylife magazine, 2007
