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Jan 13

How to clean up your credit record

Reading Time: 9 mins

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.

 

Clean up your credit record immediately

Credit score app

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.

Make sure you check all of them, too – different lenders use different credit record agencies, so even if one looks fine, another might hold the key to why you’re being rejected.

DO YOU ALREADY 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. Perhaps:

  • You have County Court Judgements (CCJs) against you
  • You’re bankrupt
  • Or you 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 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.

Why you should check your credit report

Fair score on credit report

Checking your credit record lets you correct any mistakes or anything you think isn’t an accurate reflection of your overall financial situation.

WHAT YOU CAN DO WITH YOUR CREDIT RECORD

  1. If you see ‘bad marks’ from certain companies, you can contact them directly and make your case for wiping the fault from your file.
  2. 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).
  3. 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.
  4. 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

Credit score on phone

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

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

Different credit agencies have different levels of ‘good’ and ‘bad’ scores. That’s why it’s important to check all three agencies.

How to clean up your credit record

Credit report on PC and smartphone

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!

Here’s what you do:

  1. The first thing to do is correct any mistakes on your report, as we mention about above.
  2. Close any accounts you don’t need. Financial companies pay 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.
  3. 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. See here why it’s so important to be on the electoral roll.
  4. 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.
  5. That done, the main way to improve a credit record is by borrowing money and paying it back religiously, on time, every month.

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.

WHAT IS RESPONSIBLE BORROWING?

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.

 

Go for a credit card for people who want to clean up their credit record

Happy woman holding credit card and tablet

There are a few cards on the market now that are specifically for people who have no credit history or a bad credit history.

Remember, only use these if you know you can pay them 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.

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 chrome

Vanquis Chrome Card

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.

aqua

Aqua Classic Card

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

Capital One Platinum Card

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

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.

Not eligible for any credit cards? Try This

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.

1. Sign up for a basic bank account

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.

2. Try LoqBox

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.

3. Use your rent to boost your credit

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.

 

keep on checking your credit score

Credit score on tablet on a desk

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.

 

Need to make some quick cash to pay off debts? read…

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WHAT DO YOU THINK?

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smart
25 days ago

vary good

Alma Langrum
Alma Langrum
1 year ago

I found this helpful

Aaron Filde
Aaron Filde
2 years ago

Do you need help with your credit score? You can get your bad credit cleaned up by hiring a CEH. I was able to get my score up to 800+ with the helped of; incfidelibus At GmaiI Dot Com.

Aaron
Aaron
2 years ago

Do you need help with your credit score? You can get your bad credit cleaned up by hiring a CEH. I was able to get my score up to 800+ with the helped of; incfidelibus At GmaiI Dot Com.

Daniel Grfinkel
Daniel Grfinkel
3 years ago

I am going to raise awareness for this, I worked for a major credit reporting agency and you won’t believe how many Americans are affected by poor credit, and how simply they can help their own situation. Do you not watch the news? People think that the banks are on their side, but in fact they’re trying to keep credit scores low so they make more from interest payments –

Kemi
Kemi
4 years ago

Is it possible to use credit card and never pay interest? If yes how?

Jasmine
Admin
3 years ago
Reply to  Kemi

Yes it is if you get a 0% credit card. However, there’s usually a set-up fee, or transfer fee if you’re getting a 0% balance transfer card

Stackers
Stackers
7 years ago

Sorry, further to my last comment, the site is noddle.co.uk

jed1979
jed1979
8 years ago

Hi,

Interesting article.

The equifax thresholds are incorrect they are:

0-299 (very poor)

300-349 (poor)

350-399 (fair)

475-900 (excellent)

WWE1982
WWE1982
8 years ago

I need some help and need it fast.

Mark Richards
Mark Richards
1 month ago
Reply to  WWE1982

I need help to repair my credit report UK Swansea

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