How to Improve your Credit Rating

In general, a credit rating/score is a measure of your probability to repay money you owe. The score is based on the information in your credit report.

There are many benefits to better your credit score. The main benefit is that you will qualify for many loans and receive better interest rates. Below are some good ways to improve your credit score:

Check periodically to make sure that your progress is making its way onto your credit report. Find out if any of your creditors have agreed to “re-age” your account(s), or change your status after you enter a DMP or make a certain number of payments.

Improve your score

1) Make sure you are on the Electoral Roll: In order to get credit you need to be on the Electoral roll. If the event that you are not eligible to vote but you are a UK resident, send the credit references a proof of your residency and see to that it appears on your credit file.

2) Show your Stability- Many lenders prefer people who are employed and own a home of their own. Giving your landline number is also preferred as these can help with making security checks.

3) Joint Finances: Your credit score is not affected by marriage. Nevertheless, if you share bills, your credit scores are linked together and this may impact your own score. If you are married to a partner with a poor credit score, make sure your finances are separated so as to keep a good credit rating.

4) Make payments on time - in order to improve your credit score you must be able to pay on time month after month. One way to self-check that you are financially capable of this is to define your own credit limit- The maximum amount of money you are able to owe. For example, having the debt of up to 20% of your average monthly income is a good way to make sure you can pay your debts when the time comes. This improves your overall credit history.

If you are past the 30 days of payments or are having other difficulties managing your debt, contact the lender for help, like freezing the interest rate. Remember that a credit score aims to predict your behaviour. One way to predict is by building a good credit history. This can be achieved by paying the amounts back in full all the time.

5) Reduce your debts wisely-This can be achieved by spreading your credit search over time. High frequency of credit searching in a short amount of time may work against you since you seem desperate. This is like a warning sign to lenders that you are in a lot of debt and are unable to handle the situation.

6) Always tell the truth when applying for credit. Don't give false information since this could hurt your score even further.

Repair past credit problems:

1) Mostly what you need is time. You need time to pass for any late payments, collections, etc. As time goes by, your score goes up until after 7 years when your bad credit history marks go away completely.

2) Start paying everything on time and in full.

3) Use less than half of your available credit.

4) Don't apply for new credit constantly.

Recommended actions:

1) Obtain your credit files from Call Credit, Experian & Equafax. Go through them and see what they say. View your credit report online

2) If you disagree with what your files say, write to the credit agencies and explain so that they will speak to your creditors on your behalf.

3) If the creditors disagree, you can add a Notice of Correction on your file and this allowed. (Try Google: Notice of Correction)

4) Ask the credit agencies to remove outdated items (older than 6 years)

5) Start building your credit rating: Get a phone, pay on time, stay within your banks overdraft limits and manage your finances.