Ten Steps to a Better Credit Rating
Credit reports play a very important part in our everyday finances, especially now that most of us live by using credit rather than cash.
The average Brit has up to five credit cards and at least one personal loan, which means many are fighting to meet repayments and keep a good credit score.
Having a good credit score opens many doors, it allows us to get the best interest rates and we have more products to choose from when we need a loan, credit card or mortgage.
Understand your report
When we apply for any form of credit, whether it be a mortgage, credit card, personal loan or that brand new sofa you could get on an interest-free deal, lenders need to assess how responsible a borrower you are.
In order to do this they need to delve into your finance past, look at your repayment history, what type of credit you have previously applied for and whether you have a history of bad debt.
This is where the credit report comes in. Your financial history, dating back to the day you opened your first current account, has been recorded and held by two leading credit reference agencies - Experian and Equifax.
Protect your ID
More and more people are turning to the internet to do their banking, shopping or purchasing of financial products, such as insurance. However, in doing this, they could be making themselves a vulnerable to identity thieves. It isn't just the average person that is subject to ID theft. Celebrities such as Jennifer Lopez, Robert De Niro, Tiger Woods and even Steven Spielberg have left themselves wide open for online fraudsters.
If you notice something strange on your credit report, such as a loan or credit card that you didn't apply for, you could be the victim of ID fraud.
Curb Your Applications
Once you have decided what type of credit you need, don’t just start applying to every lender in the hope that one of them will say yes.
Each time you make an application a lender carries out a search of your credit history and leaves ‘footprints’ on your report which other lenders can see.
The problem with this is multiple searches indicate multiple refusals to other lenders and this will harm your credit score.
Little white lie
When you apply for credit the worst thing you can do is lie on your application. Lenders will no doubt find out about it and refuse you credit simply because you felt the need to lie about something. Be upfront with the lender and let them take it into consideration when they asses the risk of lending to you.
Paying to improve
Don't ever be tempted to pay a firm who claims to be able to 'repair your credit history'. If you have been in debt and are sorting out your finances, the damage to your credit history will fix itself over time, paying someone to do it for you is a waste of money.
Stay one step ahead
Try your best to stay on top of your repayments. By repaying on time, future lenders will see that you are a responsible borrower and are more likely to lend to you and offer you a better rate of interest. If you feel that your debts might be spiralling out of control, speak to the lenders and let them know your circumstances, they will no doubt help you work out a repayment plan that is better suited to your current situation.
Check, check...
Get a copy of your credit report from both Experian and Equifax and check that all the information held on your credit report is true and correct. Event the slightest mistake can have a negative effect on your credit rating, so it is best to get these things sorted as soon as possible.
...and check again
It is best to regularly check your credit report to make sure that all the information is correct. This will also help you protect yourself from ID fraud because any changes to your financial circumstances are recorded on your credit report.
