Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
Your credit record could be affecting your ability to get a loan, credit card, mortgage, or even bank account.
Here’s how to find out if your rejections for credit applications are caused by a marked credit report – and how to rectify the issue.
The first thing you should do to clean up your credit record is register with one of the credit report agencies – Experian, TransUnion (formerly CallCredit) or Equifax. It’s free to request your credit report from all three providers.
On the other hand, you might very well know why no one will lend to you. Perhaps:
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 so that you can make your money work for you.
It’s still worth getting your free credit report from the three agencies even if you know why you’re struggling to get credit. There may be other errors or old defaults that you aren’t aware of, which will affect your credit score too.
Checking your credit record lets you correct any mistakes or anything you think isn’t an accurate reflection of your overall financial situation.
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.
Different credit agencies have different levels of ‘good’ and ‘bad’ scores. That’s why it’s important to check all three agencies.
Rebuilding your credit score doesn’t happen overnight. In fact, it takes at least six months – probably more like a year – to get a better credit score. If you’ve had a serious blow to your finances, such as a lot of defaults, CCJs, or bankruptcy, it can take years to fully recoup the damage to your credit score. Starting today is the best way to improve your score as quickly as possible!
Lenders look 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. These exist especially for people with poor credit ratings. Then 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.
A good rule of thumb when it comes to ‘responsible borrowing’ to rebuild your credit is to use no more than 15% of your available credit, and ideally between 5% – 10%. So, if your credit limit is £500, try to spend between £25 – £50 a month on your card and pay it off IN FULL at the end of every month.
Credit scores are based on the way you use the credit you have available to you. If you’re always maxing out your full limit, or only repaying the minimum amounts, this will harm your score. Proving you’re a responsible borrower will help to quickly improve your credit rating.
One company that focus on ethical and responsible borrowing is *Creditspring. To ensure it is lending safely, Creditspring uses in-depth credit assessments – including open banking technology – to accurately measure an applicant’s creditworthiness. This results in consistently more informed and responsible lending decisions that protect borrowers.
It also has several free tools such as the Stability Hub and the Spring Score, that provide members with weekly customised support and actionable tips to encourage more informed financial decision making. Creditspring works closely with leading debt charity, StepChange, to ensure professional financial support is easily accessible to applicants and members should they need it
There are a few cards on the market now that are specifically for people who have no credit history or a bad credit history.
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.
On the whole, the ones with the higher interest rates are the ones that will take people with a worse credit history. Their rates are high to cover themselves if you don’t pay back.
You can use online eligibility checkers on each provider’s website to see if you might be accepted. Be careful – make sure you’re using a ‘soft search’ tool and NOT a credit check or application! A ‘soft search’ won’t affect your credit rating if you’re not eligible.
You can also call the providers to ask them to do the same. Some people, such as those with previous IVAs or bankruptcy, may not be eligible for these poor credit cards. DOn’t worry – we have some tips for you below.
Vanquis (part of Provident Financial which specialises in the ‘sub-prime’ market) does a Vanquis Chrome card with a typical 29.5% interest. It’s specifically aimed at people with a bad credit history (or no credit history) who can’t get other cards. Your credit limit will be between £250 – £1000 to start with, and this can grow to a maximum of £4,000 over time.
The Aqua Reward Card has an average APR of 39.4% and no upper limit for borrowing.
You earn 0.5% cashback on your annual spending, too – and if you pay back regularly and on time, you’ll reduce the APR rate over three years, too. You can use this card abroad with no extra charges, which is great for anyone planning on travelling in the next year or so.
CapitalOne has been in the poor credit area for some years. They offer the CapitalOne Classic Platinum credit card at a typical 34.94% APR with a £1,500 maximum borrowing cap.
They also offer a transfer rate – theirs is 29.84% with a 3% fee.
Marbles offers a simple credit rebuilder card with a typical APR of 29.75% and a credit limit between £100 – £1,200. You can pay online or through the app to help keep track of your spending, too.
If you’ve recently been rejected for a lot of credit cards or bank accounts, it could be that your score is too low for any provider to take a risk on you.
Don’t panic! There are some simple things you can do to start rebuilding trust in your credit score.
Most banks now offer a basic bank account. These have no overdraft facility or monthly account fees. If you’ve been made bankrupt or can’t get another type of bank account, this will start you on the journey to rebuilding your credit score. Make sure you never go overdrawn though – you’ll face hefty fees and damage your credit.
The Money Advice Service has great information about basic bank accounts to get you started.
LoqBox is essentially a loan to help you rebuild your credit. You choose an amount you KNOW you can repay each month – say £20 – and you’ll get a ‘loan’ of 12 months’ worth of that much.
This gets ‘locked’ into an account – you can’t spend the loan – and you pay off your £20 each month as promised. At the end of it, you get your money (which is essentially your savings) ‘unlocked’ – and LoqBox confirms to credit agencies that you have successfully paid back a loan.
It’s a totally free service, too – unlike some other similar ‘credit repayment’ cards. You also won’t need a credit check to apply. Your money is safe: it’s paid into a partner bank that’s covered by the Financial Services Compensation Scheme.
CreditLadder lets you use your monthly rent payments to boost your credit score. Your rent is the biggest chunk of your monthly expenditure – so put it to good use!
This service is free for tenants to use. It acts like an intermediary between you and the credit reference agencies. Using Open Banking technology, it updates your rent payments to the Experian Rental Exchange every month. These reports help boost your credit rating, as you can be seen to be making large deposits without fail on a regular basis.
From CreditKarma to Experian to ClearScore, there are now several ways you can stay alert of your credit score for free. Sign up to these services to receive alerts to any changes in your score – and monthly or weekly report updates, too. You can pay for some premium features, but the free versions are usually enough to keep track of your credit rating.
REALLY INTERESTING INFORMATION!!!
KIND REGARDS,
TEODORA
21.4.2023
SOFIA