Unless you are a medical student or a junior doctor who is about to apply for a mortgage, chances are you’ve never learnt how to improve your credit rating score. If you are even debating buying a property any time soon, then how you improve your credit rating score is really important as this is crucial determining factor in whether or not a lender will lend to you, how much they will lend, and in some case, how much interest they charge.
How do I find my credit rating score?
So, where do you start? First and foremost you will need to determine exactly what your credit rating score is – and to do this you can take out free trial with providers like Experian or Equifax. You will have to give your card details, but if you cancel before the 30 day trial period is up, you won’t have to pay a penny. Once you know what your credit rating score and how it fares up, you can begin to take the relevant steps to learn how to improve your credit rating score before your mortgage application is submitted. It can take a few months for it to improve once you take steps to build it back up again.
Fix errors immediately
When you view your credit rating score, you will also be able to see any loan, credit card, bank account and store card and you have ever taken out. If you can see anything that is marked on your account that looks like it could be a mistake, then you could be the victim of fraud.
You can get any mistakes corrected by complaining to the credit reference agency, who have 28 days to remove the information on inform you as to why they don’t agree with your request. During this time, any mistakes are highlighted as ‘disputed information’ and lenders are not allowed to rely on it when processing credit reference information upon which to base your credit rating score.
You can also contact the lender you believe to be responsible for entering the incorrect information. Lenders are often better placed to resolve such issues as they would have been the ones who placed the incorrect information on your file in the first place. For more information about how to correct personal information on your credit file, go to the Information Commissioner’s Office website.
While you are checking for errors on your credit report, it is a good time to cross check address details to see if they are up to date, on all of your active accounts, even if you don’t use them.
To get credit you have to have credit
In order to prove to a lender that you can manage money responsively you must be granted credit in the first place. If you have never had credit, you can be in a detrimental position, due to the fact that you have never shown that you can repay money lent to you. If you have never had a credit card, it is worth taking on out, spending a little on it each month and repaying the balance in full every month. Don’t be a late payer, never miss a payment and you’ll look like you can borrow responsibly.
Break connections with bad relationships
If you have ever had a joint account or credit card with an ex and they missed a payment or were late repaying, you too will be penalised for their bad credit. You can write to credit reference agencies and ask to be de-linked from any joint finance connections, which will stop their bad credit affecting your credit rating score.
Get on the electoral role
If you are not on the electoral role, or your details are not up to date, then register to vote online as soon as you can. You could find it harder to get a mortgage if your name is not on the register, as lenders will not be certain that you have a permanent address.
Don’t apply for too much at once
If you are seen to be applying for lots of credit at once, particularly leading up to a mortgage application, it will be frowned upon by a lender. Any application you make for a credit card, store card, mobile phone contract, car insurance or loan shows up on your credit report and too many can make you look desperate for credit, so it is better to stagger your applications. You are better off searching for a ‘quote’ as it doesn’t list a quote search does not represent an actual credit application and will not have a negative effect on your credit rating.
Don’t withdraw cash on a credit card
If you ever do this, it is marked on your credit file and it looks like you are desperate for cash. It is a very expensive way to obtain cash, but it is not viewed upon as being a sensible thing to do from a lenders point of view.
Stay out of your overdraft
Living close to the edge of your finances is best avoided. Stay in the black for at least three months you’ll improve your credit rating score as you’ll appear like you can live within your means.
Avoid payday loans
With extremely high interest rates, payday loans should be avoided like the plague. Lenders can reject a mortgage application based on the fact that you have had a payday loan as it is a sign of poor money management.
Close unused credit cards
If you have credit cards gathering in your wallet that have no credit on them, then close down the account. These cards are then considered to be settled, which is good sign.
Time it right
If you have a County Court Judgement (CCJ) against you from any unpaid bills, this takes up to 6 years to be wiped from your credit records. Wait until you have a clear record before you apply for a mortgage. Credit card applications only stay on your file for a year, so make sure you time things right when it comes to making your credit file look as favourable as possible.