|So, you’ve checked your credit file … and it’s not looking good. Panic sets in and you start thinking about all the things you wanted to do: buying a car, buying a house, and how all your big plans for the near future are ruined. But it’s not over yet!.|
There are a number of things that could be affecting your credit score and you’re not alone when it comes to checking your credit file that dreaded first time only to find that all is not as you expected.
Lenders consider a number of things before approving you for credit, and although their decision doesn’t rely on your credit score alone, your credit rating plays an important role in your chances of acceptance and the level of interest you repay on different products.
But… you’re thinking, “my credit history is poor, does that mean there is no chance for me to get credit at all?!”
This is not always the case! If possible, you can even work on improving your credit rating before you apply for any type of credit in the first place.
By improving your credit score, you may increase your chances of approval for some products AND potentially reduce your cost of borrowing as you may get lower interest rates for having a better credit score.
Check your credit file regularly. See if there is anything on your credit file that shouldn’t be there. If there is, you’ll need to get in touch with the credit reference agency you are checking your credit file with and query this.
Close any lines of credit that you don’t use regularly or at all as lenders will take all these balances into consideration when checking your file. It’s better to have less accounts that are well-managed, than several unused accounts.
Register on the electoral roll. This is important for lenders to know that you are who you say you are and can be contacted easily.
Don’t make several credit applications within a short space of time. Lenders look at how many credit applications you have made at any one time, so spacing them out may reflect better on your credit file.
Make your repayments ON TIME! Lenders want to see that you can manage your credit responsibly and are likely to repay your loan back on time so a credit file that shows a history of repayments that have been made on time, would be looked on more favourably by lenders.
Building credit history. If you have never had any credit, you’ll need to start building it to show creditors that you are capable of managing credit. Maybe start with small lines of credit such as a mobile phone bill, a store card or a credit card to start building your credit history, but remember to always make your repayments on time to build a positive history.
Prevent or resolve CCJ’s, bankruptcies and IVA’s. Whilst unexpected financial blows can mean that these situations become unavoidable, it is better to prevent them from occurring where possible as these have a very negative effect on your credit file. If you have already experienced any of the aforementioned, try to resolve them and make sure you have been discharged from them as soon as you can as these usually drop off your credit file after 6 years.
Stay well within your credit limit. Aim to stay within 50% of your credit limit as often as possible, as accounts that are regularly above their 50% limit may reflect poor credit management or could suggest that you are struggling with your finances.
Patience, patience, patience! Building a non-existent credit history or re-building a damaged one takes time, so patience is key in seeing an improvement in your credit rating.
You may find that you have a different credit score across the 3 Credit Reference Agencies, and this is because they all hold different information about you. This is not uncommon, so some companies may use more than one of these agencies to get a clearer picture of your overall credit rating.
And remember, just because you have been declined for credit in the past, does not mean you will automatically be declined again now and vice versa.