How can improve my credit rating?
Summary: This article will explain how to maintain or improve your credit rating to increase the chances of an application for credit being approved.
When an application for credit is made, the lender will usually base their decision on what is known as credit scoring, and/or referral to the individual's credit rating. Credit scoring is where the lender will request specific information on the application, such as salary, time in current job, is property owned etc. Points are allocated to the answers, and if the applicant achieves enough points, the credit will usually be approved. An individual's credit rating is available from one of the credit agencies, such as Experian or Equifax.
How do I know what my credit rating is?
It is possible to see a credit rating, usually by paying a fee of £2.00, though in some instances, it may be free. It is useful to check as sometimes, there may be incorrect information that could affect future credit applications.
How can I improve my rating?
• Pay off credit card balance every month.
By using available credit cards, and paying them off regularly, lenders will see the individual as being reliable and this will increase the likelihood of getting further credit. If paying the full balance is not possible, pay back as much as can be afforded. Only paying the minimum amount could significant increase the length of time it will take to pay off the debt.
• Avoid making multiple applications for credit.
Every time an application is submitted, it is recorded on the credit file, and too many refusals can lower the credit rating. If an individual is refused credit, ask the reason as to why.
• Check the credit record.
If an application is refused, it is worth contacting one of the credit agencies to see the record. It may be there is inaccurate information that is causing applications to fail.
• Make repayments on time.
Late payments can also have an adverse affect on an individual’s credit rating. A direct debit or standing order is a good way to ensure payments are made on time, and will also allow the individual to budget more effectively as the payment will be the same amount on the same day each month.
• Cancel any unused credit.
This could be credit cards, store cards or even overdrafts. Having too much credit can be viewed by the lender as a risk and therefore they could refuse the loan.
These are just some of the best ways for an individual to improve their credit rating. However, if a individual is finding themselves struggling to repay debt, it is always best to seek advice from either one of the free services available such as the Citizens Advise Bureau (CAB), National Debtline or the Consumer Credit Counselling Service (CCCS), or from a reputable money advisor.