The first thing you should do is register with one of the credit report agencies – Experian, Callcredit or Equifax. For just £2 you can get a paper copy of your credit check in the post. Alternatively, you can view what’s being said about you in real time – just like the financial companies do – night or day, online.
With CreditExpert (run by Experian) this costs £14.99 a month, but you get the first 30 days free with no obligation to remain a subscriber. So, you could just join up, get the free month, then stop.
Similarly, Equifax offer a free 30-day trial with their Credit Watch Gold report. Checkmyfile offers unlimited access to your credit files for £9.99 a month – potentially the cheapest way to monitor your credit file in the long run.
On the other hand, you might very well know why no one will lend to you – you have County Court Judgements (CCJs) against you, you’re bankrupt, or have done an IVA (individual voluntary arrangement). If you’ve learnt your lesson, or your circumstances have changed so that you have more money now and you know what to do with it, you’ll want to clean up your credit record.
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.
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 (475-900) – Your score shows you’d be a strong candidate for credit
Good (400-474) – You have a good chance of being granted credit
Fair (350-399) – You have a reasonable chance of being granted credit
Poor (300-349) – You may have some problems getting credit
Very poor (0-299) – You may have considerable difficulties getting credit
If you score ‘very poor’ or ‘poor’, there are things you can do to move up to ‘good’ or ‘excellent’.
Signup now to get our free eBook "8 ways to make £80"!
GET OUR WEEKLY NEWSLETTER
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 score, 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’re 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.
If you’ve 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 you have the money, it would be worth subscribing to CreditExpert to see how your credit score 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:
If you enjoyed this article we think you’ll also like: