When looking to make a larger purchase of a house, car or home improvements you will need the help of lenders like TSB Bank to take out a mortgage, a loan or a credit card. But before you enter into the credit process it’s worth checking out your Credit Rating to ensure you will get the best deal for you.
What is ‘Credit Rating/Scoring’?
This is the tool which lenders use to decide whether you a good credit risk for a loan, credit card or bank service. The information held on your credit file enables a credit reference agency to analyse your information to calculate your credit score. Your Credit Report holds lists of all of your credit accounts, loan agreements and your utilities. They tell whether you have made your repayments on time and in full. Missed payments and late payments will remain on your credit report for at least six years. Likewise, the same applies for Court Judgements for non-payment of debts, bankruptcy and voluntary arrangements.
How do I find my Credit Rating?
There are various companies you can use to find your Credit Rating. The most well known companies would be Experian, Equifax or Callcredit. Experian and Equifax offer 30 days free trial of their service. The most important thing is that you check all the information held on your report first to make sure that it is correct. Notify them of any discrepancies as soon as possible. Remember also that being financially linked to someone with a bad credit will also affect your credit rating. Another great resource is www.onlinescam.net which can be used to prevent fraud.
I have never had credit before so I should be ok, right?
People wrongly assume that you will have a good credit score if you have never had any form of credit in the past. Since you have no history, they will not know whether you are a good credit risk or not so some lenders might turn you down whilst others will offer you credit with a higher interest rate.
How do I improve my Credit Rating?
- First things first, STOP applying for credit immediately. The more you apply, the lower your credit score will become.
- Make sure you are on the electoral register and register to vote. You will not be able to apply for credit if you are not on the electoral register.
- Cancel any unused credit cards. This will also make you less vulnerable to fraud.
- Pay on time, or pay early. This will show lenders that you are a sensible borrower.
- Consider a Credit Rebuild Card to build a credit history and to rectify previous issues.
- Consider using Martin Lewis’ Eligibility Calculator before you apply for credit to see if you are likely to be approved or rejected. You will be able to see this check on your Credit Report but lenders won’t so it won’t affect your Credit Rating, unlike a rejected application which will have a negative effect.
- Don’t use a Credit Card to withdraw cash. You will be charged a higher rate of interest AND lenders will think that you are unable to manage your cashflow.
- If you have savings, use them to pay off or reduce outstanding debts.
- Pay insurance annually. Paying monthly will incur a credit search which will negatively impact on your credit rating.
DISCLAIMER: I am not a Financial Advisor, these are tips I have compiled from my own personal experiences and research I have carried out for my own peace of mind. If you have concerns about your own Credit File then it is worth speaking to an advisor at one of the Credit Reference Agencies mentioned above or speaking to a Personal Financial Advisor.