8 Secrets to Getting a Healthy Credit Rating
Having a healthy credit score seems to make life easier. If you want to take out a loan on a mortgage, start a business or purchase a new car, financers are often more obliged, and willing to provide you with credit if your credit score is positive.
And on the contrary, a poor credit score makes life difficult. Lenders are becoming more strict about who they offer credit/ loans to. Being turned down for credit is not solely based on credit history and there may be other issues outside of your financial past that leads to a negative response.
How does a credit rating work?
Banks and building societies use different calculations to analyze your credit history and therefore, your credit score will vary. Your credit score report will include mortgage, credit cards, loans and repayment record.
Your credit rating is determined by:
- Information on your application
- Your credit file
- Your credit history
If you are over 18 years old and have taken a credit card, mortgage or loan, then you will have a credit report.
If you scored low on Peachy’s credit rating system or even if you have a healthy credit score, these following tips are designing to help build a good credit history and eventually, make your life easier.
1. Check your credit file and information
Before you apply for any type of loan or credit, make sure you check your credit report. You can view your credit report on a free-trial basis or by paying small fee at Experian or CheckMyFile.com. All information on your credit file must be accurate, and if you notice anything that is incorrect you should contact the lender immediately.
2. Register to vote with your local council
A simple way to improve your credit rating is register the right to vote. The electoral roll is a primary source used by lenders to verify an address. To register, visit www.aboutmyvote.co.uk or contact your local council office and they will be able to provide you with the relevant records and registration forms. The records are updated monthly so check that your name has been registered before you submit a new application.
3. Clear any associated debt away from your file
When you apply for credit, it is not only your information and credit history the lender will review. Lenders will also check the credit history with anyone you have your finances connected with, such as a partner. And not only that, lenders are likely to check the credit score on your address, both past and present. It’s important that you get a copy of your credit file to see if any old tenants past on a debt to your address or if your husband/ wife has a past debt that needs removing from your file. To have the debt cleared, write to the credit agency and ask for a “notice of dissociation”.
4. Cancel any cards you no longer use
It’s common for people to switch credit cards and banks and forget to cancel old agreements, even if you no longer use it. Even if you have paid the credit balance in full, having that line of credit will show up on your file, which will increase the size of your total debt. Lenders could assume your credit has been maxed out on these old cards and will not be as willing to offer you credit as too much available credit can be damaging.
5. Build up a good reputation and pay your debt on time
The key to getting a good credit rating is to manage your debt sensibly. If you have a credit card, you need to pay your debt on time. Paying your debt on time means you are building a positive reputation as someone who can manage credit but it’s also a way to avoid interest payments. Even if you have a poor finance history, getting a credit card might be a good way to re-build that trust with lenders.
6. Ensure your application has accurate information
Your credit application must be truthful and contain 100% accurate information. If you submit several applications and they appear inconsistent, it can have a negative impact on your credit score and may even be considered fraudulent.
You can also use the additional information fields to add further information about your credit history. For example, if you recently moved country and have no credit history or became a victim of credit card fraud, adding this information can help your application.
7. Don’t apply for several credit applications at once
Each time you apply for credit, a credit search note is made by the lender and the more credit searches that are made in a short time; the less likely you are to be approved. Try to space out your applications and do not apply for several types of credit at once as each credit search makes you look desperate.
Ideally, you will want to check whether you are likely to be accepted before you apply, which you can find out in your credit file.
8. Create a sense of confidence by showing stability
If you frequently move housing or jobs, then you will less likely be accepted for credit. Lenders are more likely to offer credit to you if you are stable, as this creates a sense of confidence. This means staying in one location for a length period, working at the company for a number of years and even including your landline phone number instead of a mobile contact number, as a landline fixes you to an address.
BONUS: Requesting a Certificate of Satisfaction from CCJ
If you have a county court judgment (CCJ) against you, then it will be listed on your credit file. The CCJ will be listed on your file for up to six years (unless you pay the debt within one month) but once the debt has been settled, you can ask for a ‘Certificate of Satisfaction’ that you can present to a credit reference agency. The ‘Certificate of Satisfaction’ will show on your credit file that the debt has been “Satisfied”. However, even if the CCJ has been settled, some lenders will not accept applicants who have had a CCJ within the last 12 months so use these twelve months to pay any outstanding debts on time.
While it can be slightly embarrassing to be declined a line of credit by a lender, it does help to know how the credit rating system works and what you can do to improve it. If you know the information before you apply, it can help your chances of being accepted.
Remember to check your credit file regularly (every six months) to ensure that it is accurate and that no one else is running up a line of debt in your name. And if you get a letter from a collection agency, always respond immediately.
For more tips on how to manage your finances, check out the Peachy blog at blog.peachy.co.uk
- How you should manage debt
- Why shoppers should always use a budget
- Step by Step Guide to using Payday Loans
Your Healthy Credit Rating Checklist
In order to help you with your credit rating, we have put together a checklist that you can use as a goal to reach your healthy credit rating.
If you can answer "Yes" to all 8 questions, then you should have a healthy credit rating.
- 1. Have you recently checked your credit file, and all information accurate?
- 2. Have you registered to vote with your local council/ online?
- 3. Have you cleared all associated debt from your credit file?
- 4. Have you canceled all credit cards you no longer use?
- 5. Do you pay your debts on time?
- 6. Is the information on your loan application accurate?
- 7. Has it been more than six months since your last loan application?
- 8. Have you had the same job and/ or location for more than three years?
Disclaimer: This checklist does not guarantee your loan application will be accepted and is not a legal document to prove you have a positive credit rating. The checklist is only used as guidance.