If you’re struggling to get a loan or mortgage it could be that you need to clean up your credit record.
Happily, there are a number of things you can do to get to the bottom of – and improve – your credit report.
- Find out what’s on your credit record for free with Experian
- Why you should be checking your credit report
- Understanding your credit score
- How to clean up your credit record
- Go for a credit card for people who want to strengthen their credit rating
- Go for a credit card for people who want to rebuild their credit history
- Need to make some quick cash? Now read…
Clean up your credit record immediately
The first thing you should do to clean up your credit record 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, FOR FREE, you can view what’s being said about you in real time – just like the financial companies do – night or day, online.
With Experian CreditExpert you pay £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.
you know why you need to clean up your credit record
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 sense to find out what information lenders are seeing on your credit record.
By checking your credit record you can correct any mistakes or anything you think isn’t an accurate reflection of your overall financial situation.
- If you see ‘bad marks’ from certain companies, you can contact them 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 you can add to any entry on your credit record, explaining the situation. 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 your credit score is, the better are your chances of being lent money.
That’s basically it. Not hard!
To remove some of the mystery surrounding credit scoring, Experian have revealed to us 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.
The Experian Credit Score runs from 0 to 999 and is an indication of how a lender may see you based on the information in your Credit Report. The higher your score, the greater chance you have of getting the best credit deals.
- Very Poor = 0 to 560
- Poor = 561 to 720
- Fair = 721 to 880
- Good = 881 to 960
- Excellent = 961 to 999
It doesn’t happen overnight. In fact 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 using one of the credit cards with very high interest rates, mentioned below, that exist specially for people with poor credit ratings. Then you make sure you pay the debt 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.
Happily there are a few cards on the market that will help you clean up your credit record. Here are some of the best ones:
- Capital One’s Classic MasterCard: Good if you’ve been turned down for credit but want all the benefits of a credit card. The Capital One Classic MasterCard offers sensible, manageable starting limits of £200–£1,500, helping you keep control of your finances while spreading the cost of your purchases – helping you manage your money. And while you spend you’ll be helping boost your credit rating, helping make your financial future brighter. But only use it if you can pay it off – otherwise you’ll pay interest of 34.94% on your debt. Otherwise, it’s a good card that will help repair your credit rating. You can apply for one online – you should get a response within 60 seconds.
- Vanquis Credit Card: The Vanquis Visa Card is similar but comes with a slightly higher rate of interest at 39.9%. It is specifically aimed at people with a bad credit history who can’t get other cards. Again, only 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.
- 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 – 34.9% typical APR – so only get this card if you know you will pay it off every month and you’re serious about rebuilding your record. As a nice little bonus, Barclaycard will give you 0% interest on purchases for the first five months.
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 they do reject you, it’s not the end of the road. Another option is the Cashplus Creditbuilder prepaid credit card. Prepaid 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 Experian 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 health.
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:
- Complete the registration.
- Make a note of your details, including the credit file reference number.
- Your PIN should arrive in the post in a few days.
- Use the PIN to log in online and check your credit record.
- Inform CreditExpert of any inaccuracies.
- 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.
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