A good credit rating is vital to being able to access loans and mortgages. The importance of a good credit rating is even more important now that the credit crunch has made lenders suspicious of people with bad credit histories. These are some tips on improving your Credit Rating
1. Check Your Credit Rating.
It is important to know your current credit rating and check to see it is accurate. You can have access to your credit rating through an agency like Equifax and Experian Under the consumer credit act of 1974, you have a right to see it at a cost of £2. This £2 figure is determined by the government, so if agencies start charging a lot more be very suspicious. If you see any discrepancies chase them up with the financial institution involved.
2. Understand why you were turned down.
Although it is not compulsory, most firms will explain why they turned you down. This can be useful for understanding what you need to do. It can also help you avoid applying for the same products and getting rejected in the future.
3. Avoid Getting Repeatedly Rejected.
If you have a trail of turned down applications, other companies will start to be suspicious. If you get turned down, try to understand why, wait a while and then try again. Avoid applying on mass; make sure you do one at a time.
4. Good Budgeting.
The best way to avoid a bad credit rating. Is to spend time on organising your finances. Make sure you know how much you can borrow on your bank overdraft. Be prepared for occassions when you get close to the limit and take preemptive action. Most problems and bad credit ratings occur because of poor planning and lack of awareness of the financial situation. It is worth spending a little time to organise your finances and avoid unnecessary missed payments.
5. Make Sure You are on the Electoral Roll
Companies look for this and are suspicious of people who avoid being on the electoral roll.
6. Take Care of All Bills.
Even if you miss a payment on a mobile phone or internet bill it could harm your chances of getting a mortgage or bank loan. If you have a dispute with a mobile phone company and miss a payment and then close an account it can be very damaging on your credit account. A student of mine said they were annoyed with their mobile phone company, so they were going to just walk away and leave an unpaid bill, but, I told them that could cause problems for upto 6 years in the future. They would be annoyed they can’t get a mortgage just because of silly dispute with a mobile phone company.
7. Ask Your Bank to Reconsider
If you just miss a payment or go overdrawn, you are likely to receive a negative credit rating. In this case it is worth contacting the bank and explain the extenuating circumstances. If it is a one off they may agree to write off the bad credit history as a gesture of good will. You have nothing to lose by doing this, they may even cancel or reduce the bank charge.
8. Some Debt is Good.
If you never have any debt, a company will be suspicious. They may think you are incapable of managing debt, and so will be reluctant to be the first. However, if you have a good track record of paying your credit card off on time, then this helps your credit rating. The best customer is one who takes out a good amount of debt and then pays it off under the agreed contract. If you have no debt, you will not appear a profitable customers.
9. Avoid Being indebted to the hilt.
On the other hand if your debt to income ratio is very high, it is going to be difficult to get any more loans. This is because the firm feels you are close to maximum debt capacity and there is a chance you could go bankrupt and they would lose out. The only thing to do here is to try and minimise debt.
10. Avoid Being associated with bad debtors.
If you have a joint debt with someone else who has a bad credit history, this can bring down your credit score. If you have an ex partner, who has a bad credit history on your credit report, have them removed.
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