Building a decent credit file can take some time, but many of these tips can help to give your file a boost. Even if you think you know what your credit score is and what it says on your file, it’s always worth keeping up to date and giving it a bit on an MOT every now and again – particularly if you want to apply for unsecured credit or a mortgage in the near future. Read on for H&T’s best credit improving tips:
1. Make sure all your information is correct
When checking your credit score, don’t just focus on what it says about your lending history. It’s just as important – if not more important – to check your name is spelled correctly, that your address is full and correct, and that any other personal details are 100% accurate. If a lender has different information to what is on your file, just one mistake can mean you are rejected for credit due to the strict rules on ID and fraud prevention. With this in mind, it’s also important to be consistent with your applications – if you have more than one name or title, or if you write your address differently, it could make a difference.
2. Register on the Electoral Roll
To provide an extra layer of assurance, it’s essential that you register on the electoral roll at your current address. This shows on your credit file and makes a huge difference to your chances of being approved to credit. The Electoral Roll adds official proof of your name and address, thus cementing who you are.
If you are not eligible to vote in the UK (you are a non-Commonwealth or non-EU foreign national, for instance) you can send copies of your UK driving licence or utility bills to the credit reference agencies as a proof of residency, which should help.
3. Make all required repayments
One of the most obvious ways to improve your credit score is to simply pay your debts on time. While this may sound like a no-brainer, sometimes things happen in life which can make this difficult. Where possible, pay what is owed before or on the agreed deadline and if you know you may have trouble with this, speak to your lender to work out a plan. You’re less likely to have hiccups reported on file if you communicate and show willingness to work through any problems.
4. Be aware of financial linking
Anyone who shares a joint account with you (bank account, credit card, even utility bills) is likely to be linked up with your credit file. If you are financially linked with someone else, then their score can affect yours and vice versa. If they have a very poor credit file then this can lower your credit rating, and if theirs is much better than yours, you may get a bit of a boost. Close any joint accounts which are no longer used or relevant, such as accounts held with an ex-partner or old housemates.
5. Don’t apply for too much at once
If you apply for more than one thing at a time, lenders can see this is desperation. Lots of applications over a short period of time – whether they result in your loan being approved or not – will mark your file and tell a story. While it may seem prudent to apply to lots of different places to up your chances, it can actually be harmful. Ask lenders to do a ‘soft search’ where possible, so that it doesn’t show on your file.
You should also avoid having too many avenues of credit open at once. For instance, if you have multiple credit cards but only really use one or two, it’s best to cancel the rest. Just because your credit limit allows it, you don’t have to use it all.
6. Wait for past issues to ‘run out’
If you have CCJs (County Court Judgements), IVAs (Individual Voluntary Agreements) or bankruptcy listed on your file, then it’s likely you’ll have trouble being approved for credit from most lenders. However, your credit file will only list the last 6 years of your financial history. Once 6 years have passed, these do not show on your file. If you don’t have long until this deadline is up, it may be wise to wait until past problems have dropped off the list.
7. Avoid Payday loans
Payday loans have a bad reputation within the industry and unfortunately, you may be turned down for a mortgage application simply for having a payday loan on your credit file. Even if you paid off the loan in full and on time, its presence on your file can suggest poor money management and this is what mortgage lenders prefer to avoid. Payday loans are notoriously expensive and can easily create what is known as a ‘debt spiral’, making it continually harder to escape.
8. Report any issues to the Credit Reference Agency
Contact the relevant Credit Reference Agency directly if you see an error on their file. You may want to contact the lender as well if there are discrepancies in your borrowing information. Mistakes can simply be down to a clerical error and require flagging up before they can be fixed.
If, for whatever reason, you are unable to remove an error, you have the right to add a ‘notice of correction’ to your own credit file – this should be a short, concise and factual explanation of the error, which lenders will be able to read when you make future applications.
Keep checking on your credit file regularly, so that any problems can be identified and resolved quickly. This will help you understand what you’re likely to be approved for and will allow you to identify what affects your credit rating over time.