How Can I Improve My Credit Rating?

Article Category: Finance

Are you finding it hard to access the best credit rates, or even get a loan or credit card at all? The route to more cost-effective borrowing lies in improving your credit rating so that lenders see you as a lower risk prospect. Whilst sometimes rectifying a simple mistake on your credit file can remedy this – in general, improving your credit rating should be seen as a longer term ambition, akin to losing weight.

Check your credit file

Order a copy of your credit report from an authorized credit report agency and go through it with a fine tooth comb. It could be that a small thing, such as an open account registered to an old address is causing lenders to reject your applications for credit on the ID check alone. Make sure all the address details on your active accounts are current.

Problems can also be caused by ‘linked’ accounts, such as bill accounts held in joint names from a shared house or a joint credit card from an old relationship, where the other parties have gone on to have poor credit. Write to the credit agencies and ask them for a notice of ‘disassociation’ to stop their credit rating being erroneously referenced on your credit file in the future.

Sometimes there can be payment defaults incorrectly held on the credit file. Your first port of call is the company that has registered the missed payment with the credit agency – write to them with details of your complaint, asking them to wipe the fault from your file.

In addition to the three major credit bureaus, you can also get a copy of your free credit score report by visiting FreeScore.com.

Use credit cards responsibly

If you have legitimate defaults on your file, you need to start rebuilding a more attractive credit history – and this will take time. With any outstanding credit card balances, get current with your payment schedule and stay current. Do not default or miss any more payments. Try to pay down your ‘revolving finances’ such as credit cards as much as possible, as high outstanding debt will negatively affect your credit rating.

To work out how long it will take to pay off your credit card debt, use our handy loan calculator.

If your payment history is a complete mess, the main route back to credit-worthiness will be a high interest rate credit card. Use this for six to twelve months, strictly paying back the total balance every month in full so there’s no interest cost.

Contrary to what may seem common sense, don’t close down old credit card accounts. By all means chop up your cards so you can’t add to your debt, but an applicant with no credit cards is seen as a higher lending risk than one with credit cards managed responsibly.

» Work out how long it will take to pay off your credit card debt by using our loan calculator.

Written by Jo Dimbleby