How to Improve your Credit Rating in 4 Easy Steps
A bad credit rating can cause you real difficulties 😦
1. More Expensive Loans – a limited choice of loans that are typically much more expense
2. Rejected for mobile phone contracts – much more difficult to get utility and mobile phone contracts
3. Turned down as a tenant – fewer Landlords will take tenants with a bad credit history
Improving your credit rating can, therefore, have real benefits, and we look at the 4 steps needed to do this.
Step 1: Buy a full multi-agency copy of your credit file
We suggest getting a fully detailed copy of all the information all the credit reference agencies hold on you.
With this information, you can then start to develop a plan for improving your file.
To find out about the advantages offered by obtaining a multi-agency credit report, please click here.
You can try checkmyfile free for 30 days, then for just £14.99 a month after, which you can cancel online at any time.
Step 2: Make sure all the information being held us up to date and correct
Now you’ve downloaded your report you now need to look through this and make sure everything is as it should be, including:
a. Electoral Roll
Your electoral roll stats does affect your credit score, and on your multi-agency report, you need to make sure that the information Equifax, Experian and Call Credit hold on you is up to date and correct (and this includes other people registered at your address.
If your electoral roll information is not correct, you can speak to a Check My File Agent on 0800 612 0421 who will be able to help you get this corrected.
b. Payment Mistakes
Other mistakes could be for example missed payments that you did in fact make. Though if there are mistakes, unfortunately, you only have 28 days from the time the mistake first appeared to get it corrected.
What you need to do is write about 200 words explaining what something is not correct and what was actually happened, and submit to the relevant credit reference agencies
Curious about what type of information is held on your credit report? Check out – Credit reports: all you need to know
Step 3: Other things you can do to start improving your credit rating
a. Stop applying for credit
This may seem like a strange item, one of the main drivers for improving your credit rating is to be able to get access to loans and finance. Though failed loan applications do not look good on your credit file, and the more you have, the worse your file looks.
So if you are going to apply for finance, make sure you do your legwork first, know how your credit file looks, and only apply to places where you know you will get accepted.
b. Cancel unused credit cards
This not only helps to improve your credit score but will also reduce the risk of you falling victim to fraud (which is very common with credit cards).
c. Negotiate with existing lenders
If you have existing lenders with whom you have defaults and missed payments, you can try negotiating with them – whereby you pay off some of the outstanding loans in return for them removing the missed payments and defaults from your credit file.
This does not always work and does require you to have the money to pay off some of the loans, but if you do have the cash, it is worth a go.
Martin Lewis, from MoneySavingExpert.com, offers some additional tips for boosting your credit rating in the following article: Credit scores: Boost your credit rating – MoneySavingExpert
Step 4: Start successfully making credit payments
One of the reasons why lenders put so much weight on a person’s credit file is that they want to see a history of successful loan repayments. So the quicker you can start showing this history on your file, the quicker your credit score will start to improve.
There are a number of ways that you can do this:
a. Credit Builder Pre-Paid Card
Some cards are specifically designed to help you build your credit score. You are typically loaned a small amount, usually £60. You then sign a credit agreement and pay back about £5 a month. Though there are fees and charges involved.
b. Credit Builder Credit Card
These are like other credit cards, but the interest rates are higher (around 30 40%) and credit limits are typically small at around £500.
c. Bad Credit Loan
There are many types of loan available to those with a poor credit rating, these include:
- Payday loans (short term loans up to £500, very expensive at APR’s up to 5,000%)
- Doorstep Loans (small loans up to £500, monthly repayments up to one year, APR’s typically 275% up to 550%
- Guaranteed Loan (£500 to £15,000, requires a friend or family member to guarantee you repayments, APR’s typically about 50% for loans from £500 to £15,000).
To explore additional tips to help rebuild a credit rating, visit the Money Advice Service article – How to improve your credit score
What if you have a bad credit rating and need a loan?
If you do not have time to go through all the steps listed and need an affordable loan now, there are options 👍
Guarantor loans are typically the best value of all types of poor credit loans.
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