• Find out what’s on your credit record with Equifax and Experian.
• Why you should be checking your report
• Go for a credit card which is specially for people who want to strengthen their credit rating or rebuild their credit history, like the Barclaycard Initial card or the Capital One Classic

Why you should check your credit report:

If you’ve had trouble getting credit, it makes excellent sense to find out what information lenders are seeing. Mainly because by doing so you can correct any mistakes or anything you think isn’t an accurate reflection of your overall financial situation.

By doing this, you’ll improve your credit score – the thing on which financial companies base their decisions on whether to lend you money.

You do this by contacting the company directly and make your case for wiping the fault from your file. If you don’t find them very receptive and you’ve got a good case, you can complain to the Financial Ombudsman (which acts as an independent referee of the financial sector).

Alternatively, you can add a Notice of Correction – a 200-word statement  – to any entry on your credit record, explaining it. For example, if you missed a few payments on your credit card a couple of months back due to illness, ordinarily the bigger story doesn’t appear – just the cold, hard facts that contribute to your bad record. So, an explanation of why payments were missed may influence a lender’s decision to offer you money.

With fraud and identity theft on the rise, it’s possible that someone else created a credit problem for you somewhere along the line. Checking your file could alert you to someone having stolen your identity without you knowing.  If that’s the case, get the situation sorted and add a note to your file.

Understanding your credit score

The higher it is, the better your chances of being lent money. Not what you’d call rocket science!

To remove some of the mystery surrounding credit scoring, Equifax have revealed their ‘credit scoring test’ system. It’s worth having a look at it even if you’re looking at your report through another company – theirs will be similar.

Excellent – Your score shows you’d be a strong candiate for credit        90 – 100

Good – You have a good chance of being granted credit                            70 – 89

Fair – You may have some problems getting credit                                     50 – 69

Poor – You may have considerable difficulties getting credit                       0 – 49

If you score ‘fair’ or ‘poor’, there are things you can do to move up to ‘good’ or ‘excellent’.

How to improve your credit score

It doesn’t happen overnight. It takes at least six months – probably more like a year – to get a better credit record, particularly if you’ve been bankrupt in the last few years.

The first thing to do is correct any mistakes on your report, as we talk about above.

Got accounts you don’t need? Close them. Financial companies are paying attention to the total amount of credit available to you. So while you may not be using them, dormant accounts could still be affecting your credit score.

Also, make sure you are on the electoral roll. Weirdly, not being on that can count against you for your credit rating. Just ring up your local council to get yourself put on it.

If you think you might have a low credit score, but you want to know how much a company would charge for a loan, ask them to do a ‘quotation search’ not a ‘credit search’. This means they will give you an idea of the interest rate they would charge but they won’t do a full credit check (and then potentially refuse you). Every time a company does a credit check on you it is recorded – particularly if they refuse you credit. This harms your credit rating.

That done, the main way to improve a credit record is by borrowing money and paying it back religiously, on time, every month.

Lenders are looking for proof that you’re capable of repaying borrowed money. “But how can I borrow if no one will lend to me?!” you wail. You do it by borrowing from one of the very expensive, ‘sub-prime’ lenders and making sure you pay back before the interest period kicks in.

In other words, take out a credit card with a very high APR (Annual Percentage Rate), use it a small amount every month and then pay the bill every month during the interest-free period. There are a few companies that offer credit cards to people with poor credit records.

• Vanquis (part of Provident Financial which specialises in the ‘sub-prime’ market) does a Vanquis Visa card with a gargantuan 39.9% interest. It is specifically aimed at people with a bad credit history who can’t get other cards. DO NOT USE IT UNLESS YOU KNOW YOU CAN PAY IT OFF. You think things are bad now? Just see how you feel if you use this, can’t pay it all back and then get the massive interest slapped on every month.

• CapitalOne also does a very high interest credit card (34.9%) which it will offer to people with poor credit histories (or no credit history which can also be a problem if you want to borrow). Again, do not even think about using this card if you are struggling to pay your bills now.

• SAV, like Vanquis, aim their cards at people with bad credit history. The APR on their SAV Aqua card is a whopping 35.9%. We may sound like a broken record, but only apply for this card if you are certain that you can pay it off within the interest free period.

• If your credit rating is poor but not terrible (i.e. you don’t have CCJs against your name and you have only missed a payment or two in the last year) then you could try the Barclaycard Initial card which is specially for people who want to strengthen their credit rating or rebuild their credit history. The interest rate is high – 29.9% typical APR – so only get this card if you know you will pay it off every month and you are serious about rebuilding your record.

If you have been made bankrupt in the last few years or you have started an IVA scheme, ring up the above companies for a general quote before applying. It’s quite possible even they will reject in the early stages of an application.

• If they do reject you, it’s not the end of the road. Another option is the Cashplus Creditbuilder pre-paid credit card. Pre-paid cards are a really good idea for people who can’t get credit cards anyway because you don’t need a credit check to get one (see our article about them here), but this one is even better. When you use this card, and use it regularly for twelve months consecutively, you can actually build up your credit score (hence ‘Creditbuilder’!).

If you have the money, it would be worth subscribing to Creditexpert to see how your record is improving over the months – but only if you have the money. Otherwise you could apply for your basic credit report every few months to see the change as you go on.

After all that, though, a lender’s decision is at their discretion and you could still be refused credit. Nevertheless, following our advice will hold you in good credit stead.

How to get Credit Expert’s free online report

• Click on this link for Experian. It will take you to their home page where there’s a “30 Day Free Trial” box. Click on it, and you’ll be taken through to the registration page.

• Now follow these simple steps:

1. Complete the registration.
2. Make a note of your details, including the credit file reference number.
3. Your PIN should arrive in the post in a few days.
4. Use the PIN to log in online and check your credit record.
5. Inform CreditExpert of any inaccuracies.
6. Cancel your membership (so you don’t forget or get charged anything) by phoning 0800 656 9000 and selecting Option 4. You can email but you’ll be quoting your bank details, so it’s best to speak to someone on the record.

Useful links

Check out these websites to find out what’s on your credit record.

• Experian
• Equifax

Try these credit cards to build your record or just to use while your record is low:

• The Cashplus Creditbuilder pre-paid credit card
• The Vanquis Visa card
• The SAV Aqua card
• The Barclaycard Initial card which is specially for people who want to strengthen their credit rating or rebuild their credit history