@chooseonline
Newsletter
More

IT can help you get a mortgage, a loan, even a mobile phone or a lower interest rate, so it makes sense to check your credit rating: repair it if it's ailing, or boost it, if it's just not quite fighting fit.

You don't have one credit rating, each lender weighs the product you want against the information they happen to have about you to reach a decision.

But that doesn't mean you can't tip the balance in your favour by making sure the information side is correct and consistent or, to put it another way, repair your credit rating.

So here's our plan to repair your credit rating in 30 days; it's like the Special K diet for your finances.

Days 1-7

Order your credit report(s); get on the electoral roll

Let's start small in week one. One of the easiest things you can do to repair your credit rating is to get on to the electoral roll.

When you're registered to vote it gives lenders a really simple way to see that your name and address check out, it doesn't take long and it's free.

Each local authority has a different procedure for registering, go to Direct Gov's electoral roll site to find out how to enter your details.

Not sure if you're registered? Your local authority will be able to tell you and About My Vote can help you find the right person to ask.

Note that it'll also help to improve your credit rating if you're consistent in applications (see week 4 for more on this) so if you write your address in a few different ways try to stick to the format listed on the electoral roll in future.

Next, it's credit report ordering time.

Not the non-existent 'credit rating black list' but just the information held on you by major reference agencies that lenders might refer to.

Many reference agencies make these reports available for free online with a 30 day trial of their service. After 30 days you'll have to make a regular payment to keep tabs on your report and if you just want the trial you'll need to cancel before the 30 days are up.

If that sounds a bit stressful, it does to us, you'll be better off ordering a statutory credit report which costs £2. You can order from the 3 major agencies below.

• Equifax
• Experian
• CallCredit

You can see these reports online but you can also choose receive them by post so we'll return to this in week 3.

Days 8-14

Automate your finances; ditch unused lines of credit

In the long term, using the financial products that you have consistently and responsibly will help to improve your credit rating.

That's why it's a good idea to automate as many of your payments as you can to avoid obvious 'black marks' like missed credit card payments. The aim is to make your finances a well-oiled machine that pretty much runs by itself while you do something more fun with your time.

So: got a credit card? Set up a direct debit to meet the minimum repayment or, even better, more than the minimum.

Dip into an unplanned overdraft now and then or think you might? Request an overdraft to give yourself a buffer or, if you're getting a bad deal, switch current accounts altogether.

Another bit of futureproofing to repair your credit rating is getting rid of credit products that you're not using.

Having a rarely touched bank account won't hurt but holding a lot of credit cards, even if you never or rarely use them, makes you more risky because it means you could easily borrow big.

To cancel cards call the provider, it's not enough to just cut them up Bridget Jones-style.

Days 15-22

Review your credit reports; debt busting

By now you should have at least one credit report and that means you'll be able to see, more specifically, how to repair your credit rating.

Go through with a fine tooth comb: you're looking for inaccuracies in personal details like the wrong date you left an address or, worse, the wrong address and inaccuracies in your finances like a wrongly listed missed repayment.

Make sure you also look for the underused lines of credit we talked about last week and any financial links that may harm you.

Note that it's only when you have a mortgage or a joint bank account with someone else that lenders regard you as 'financially linked'.

Simply living in the same house as someone with a poor credit rating won't hurt you even if you're married or in a civil partnership.

If you find an inaccuracy write to the credit reference agency and inform them of the mistake, they can update it or wipe some things, like a default on a debt, altogether.

If it's a problem with a debt that's still open you can also talk to the lender.

As a last resort, an explanation of a complex problem can be recorded on your report (known as a 'note of correction') and can help your credit rating by straightening out an unusual blip.

You can't hide or erase defaults, County Court Judgements (CCJs) and bankruptcies but they will be wiped after six years.

Finally, and importantly, your credit report lists any outstanding debts you have.

If the potential for debt (those old credit cards) makes lenders jumpy imagine what the real thing does. That's not to say that borrowers have bad credit ratings but the best minimise debt as much as possible.

It's also a good idea full stop, especially on credit cards. 0% balance transfer credit cards could be useful for this.

Days 23-30

Keep those good habits; consider 'credit building' cards

Last week and time to look to the future.

The best way to truly repair your credit rating is to not damage it in the future. That means staying stable and consistent (we know, we know, boring) as much as possible.

You've already gone part of the way on this in week two by automating as many of your payments as you can, now it's time to get into a few more good habits.

Do your research before applying for a new credit card or loan - now that you know where you stand with your credit rating that should be a lot easier - and choose the best time to make a new application, a time when you haven't just made a big change like a new address or a new job.

Research and timing mean you're far less likely to get a rejection.

For more on credit card applications, we've covered the topic in more detail in this article on online applications and instant decision credit cards.

Rejection hurts on its own but it's also best avoided because lenders can see if there's been a recent search on your report and that hurts your score. That won't matter to you if you get the deal you want but it will if you're forced to apply again elsewhere.

To avoid knock backs from searches make sure you space out applications for any products that require a search on your credit report by at least 3 months to give yourself the best possible chance of success - even if the products you're applying for seem completely unrelated to each other.

Remember, getting a new insurance policy or moving to a new mobile phone or broadband contract can mean a search on your file.

Finally, consider products aimed to help rebuild or improve a credit rating.

Poor score credit cards can help to improve and strengthen a damaged credit history, as well as help to build a new history as well, or if you're not ready to make a credit card application, the Cashplus prepaid card offers another way to add positive marks to your credit file.

See our full guide for more on how credit cards can improve a credit score here.

Comments