Your credit rating is a score that can have an impact on your ability to borrow money in the long-term using financial products like mortgages, loans, and credit cards. If your credit rating is poor, then there are things that you can do to improve it and fix the existing problems that you have. However, for as long as your credit score is in bad standing, you could find that you have trouble applying for loans and getting good interest rates on the loans that you are accepted for.
The Things that Impact your Credit Rating
Obviously, it’s always a good idea to avoid anything that might have a negative impact on your credit score. To help you make sure that you stay away from anything that might damage your credit history, we’ve created this list of some of the things that might affect it, including:
High levels of debt: Most credit card companies and banks will feel uncomfortable about lending you money if you’re already stretching yourself over numerous debts.
Late or missing payments: If you make late payments, or fail to make payments on things like your credit card, mortgage, electricity bills, gas, personal loans, and more, this will stay on your credit file for a period of six years.
Applying for lots of credit: Whenever you attempt to access credit through an application, these applications will show on your credit report. It’s a good idea to stagger your applications, because applying for a lot of different things at once can make you look desperate.
CCJs: If you end up with a county court judgement, or a decree for an unpaid debt or bill, this could cause serious problems with your credit score. Often, CCJs can stay on your file for around six years.
Unused credit card accounts: Lenders often examine the amount of credit available to you when determining whether to lend to you. This will include credit that you’re not using.
Mistakes: Any accidental problems on your credit score that lenders see when they’re running a credit check process could impact your ability to borrow money. If something on your credit report is wrong, or doesn’t apply to you for any reason, then it’s important to make sure that you have the issue removed and investigated.
Lack of registration: The electoral register is used to verify that you actually are the person that you claim to be.
Moving around frequently: Lenders are often more comfortable lending to people who live at the same address for long periods of time.
Joint credit: Being tied to any kind of joint credit such as loans, mortgages, or bank accounts with someone who has a bad credit history will impact your opportunities to access credit.
Fixing Mistakes on your Credit Report
Although there are many things that a person can do to damage their own credit report, it’s also pretty common for mistakes to appear on a credit report that have nothing to do with your financial behavior. You should make sure that you check your credit report as often as possible to see whether there have been any mistakes, or whether you might be a victim of fraud. You have the right to see your credit report, or a copy of it, for a small fee.
If you notice any mistakes on your credit report, you can challenge them by complaining to the credit reference agency in question. The company will have a period of 28 days to remove the mistake from your account, or tell you why they don’t agree with your argument that it is a mistake. During this time, the mistake on your account will be marked as disputed, so that lenders can know that they shouldn’t rely on it when assessing your credit.
It’s also possible for people who are pursuing credit report mistakes to speak directly to the lender that they think is responsible for the incorrect entries. Credit reference agencies will often rely on information supplied by lenders, which means that lenders are in a good position to solve problems. If there is information on a credit file that doesn’t reflect your existing situation, you can also consider adding a notice of correction into your report.
Tips for Improving your Credit Rating
If you don’t have any history of borrowing, or your credit score is poor, there are quick steps that can help to improve your credit rating. For instance, you can:
Cancel any credit cards that you aren’t using. This reduces your chances of falling victim to fraud too.
Get on the electoral register, it’s much harder for people who aren’t on this list to get the credit they request.
Stop applying for any form of credit until problems with your file have been addressed and your credit score is improved.
Make sure you make all repayments on time and pay accounts early where possible. This helps to show that you’re a sensible borrower.