Loans are hard to get if your credit score isn’t perfect. Many of the best credit card deals that we mention are also not available to you if you don’t have the best credit record. But fear not! Even if you have a credit record that makes you want to weep, there are ways of cleaning it up over time.
- What affects your credit file?
- 10 easy ways to improve your credit record
- Should you pay to access your credit file?
If you have applied for several new loans or credit cards recently and been turned down. Financial companies are like sheep – if they find that you’ve been turned down by a few other lenders, they’re likely to turn you down, too.
- Several applications for credit and loans at the same time make you look like you’re in a desperate financial situation.
- County Court Judgments (CCJs) against you
- You’ve regularly been delayed with mortgage or loan payments.
- If you don’t pay your phone bills for a few months, this is considered a big black mark.
- Your age affects your points score. Too young can be as bad as being too old.
- If you’re single it can be a problem – being married gives the impression that you’re stable and have a potential second income to rely on.
- Having the same address over a long period of time will help.
- If you are not on the electoral roll you can be rejected.
1. Make sure you are on the electoral roll.
If you’re not, write to your local council who will send you the registration form. You can opt out of the public register for free, which means people can’t openly access your information. The private electoral roll is only used by public agencies like your local council.
2. Pay bills on time
If you cannot do this, contact the supplier, credit card provider, or bank as soon as possible to discuss what options are available to you. You may be able to change your repayment schedule, or make a minimum repayment instead.
3. Check your credit record for CCJs
Check your credit record through the credit reference agencies like Experian. Make a note of any unusual activity that you don’t recognise and contact the credit agencies to investigate. Most importantly, check for County Court Judgements (CCJs). These can be issued and missed if you’ve recently moved house, for example, and didn’t receive the summons. It’s really detrimental to your score, so resolve this as soon as you can.
4. Check any resolved bankruptcies
If you’ve paid off your debts or have been discharged from your bankruptcy, check your record with Experian, TransUnion (formerly Call Credit), and Equifax. Settled or discharged debts can take up to four months to show on your record – if they aren’t listed after that time, contact the credit agencies and the lender.
5. Look at closed accounts as well as open ones
Any line of credit – even a mobile phone bill – that you’ve paid off should show as closed and settled on your credit record. If it’s not showing as settled – or worse, as a default – contact the lender or organisation immediately to sort it.
6. Work on building your credit history
If you’re young or have no credit history, apply for a basic credit card with a low limit. A mobile phone contract can also help. Use the card a little bit each month – around 20% of the limit is a good guide – and pay it off IN FULL every month on time. This will show lenders you’re a responsible borrower. Don’t use the credit to buy more stuff: use it for things you would buy anyway. For example, do your weekly grocery shop with it or use it to pay for fuel for your car.
However, if you can’t borrow credit because you’ve been in debt before, don’t despair. There are ‘bad credit’ credit cards available to you. The interest rate is through the roof – usually at least 39% APR – but using it a little each month and paying it off in full will rebuild your credit history. It’s a slow journey, but worth it. Check out our credit rebuilder article to discover the best credit rebuilder cards.
7. Let your rent improve your credit
Tenants can use Credit Ladder to prove they’re responsible to lenders. It’s a free service for tenants to use, too. You pay your monthly rent via Credit Ladder. They report each month to credit reference agencies that your rent – a large sum – has been repaid in full, on time. Over time, this rebuilds your score as a responsible spender.
8. Use a credit improver
Similar to using your rent – an everyday expense – to rebuild your credit, you can use small savings to help, too. A credit improver service like Loqbox gives you a small loan. You don’t get the cash, though! It’s locked into an account for you. Every month, you make agreed ‘repayments’ to this loan. At the end of it, the money you paid is released into a new bank account for you. It’s a great two-fer: you get to rebuild your credit score AND finish up with savings!
9. Stop at the first rejection
If you’re rejected for any type of credit or bank account, STOP! Research your credit record with each of the three credit reference agencies. Don’t just keep applying, assuming you made a mistake on the form. Multiple rejections in a short space of time can take YEARS to knock off your credit record – so avoid it at all costs!
10. Seek help for debt ASAP
If you’re already spiralling into debt, don’t apply for credit. Especially avoid things like payday loans – they’re expensive and look really bad to lenders looking at your credit record. Instead, take a deep breath and seek help.
Contact the National Debtline or Stepchange to talk through your finances and set up a repayment plan. You can also look up your local Community Money Advice centre for help, too. Jasmine is a patron of this financial education charity: they’ll help you manage your debts and finances and help you get back on track.
- Anyone who has been burnt in the past, for example a victim of identity theft, who is worried it might happen again.
- People who don’t trust their partner or housemate/s and need to check whether any fraudulent credit applications have been made in their name.
- Anyone who is overly concerned about their credit rating.
Chat to Experian and they can tell you more about their services.
To learn more about how to clean your credit report, read on.