How much do you know about your own credit rating? Did you know how important it can be, how easy it is to keep it clean and, how easily you can screw it up? Your credit rating can affect your ability to get a loan and affect the interest rates that you will be offered, so read on and find out how you protect your and improve your credit score.
1. Find out where you stand
The first step is to find out what you have recorded against your name. Even if you have had money problems in the past, this is still worth doing because there are some simple steps that you can take to improve your credit score. The two main credit reference agencies in the UK are www.experian.co.uk and www.equifax.co.uk. If you want to find out what they are saying about you, go online and, for a small fee of just a few pounds, you can check out your own credit report.
2. Get registered on the electoral roll
OK, so UK politics are pretty boring these days and you may well not want to be bothered with voting, but not being on the electoral roll at all can have a negative impact on your credit score. Lenders check the electoral role as a check of your identity and some lenders will be discouraged from lending to you if they can’t find your correct details.
3. Be careful that you don’t make too many loan applications
When you are shopping around for credit, be careful that a potential lender does not take an enquiry to be an application. Every time you make an application, it will be recorded by the credit agencies and, too many applications will make you look desperate, or give the impression that you are borrowing too much, too often.
4. Check your credit report for error and omissions
Some lenders are quicker at informing the credit reference agencies of defaults on loans than they are at informing them that a loan has been repaid. Check your credit report carefully for any old, repaid loans that are still showing as being live and check that all the loans are really your own.
5. Get your ex off your own credit report
Just because your divorce has been finalised that doesn’t automatically close any joint accounts that may have had. Make sure that all joint accounts are closed, or transferred to a single name, or your ex-wife’s overspending could come back to haunt you again! You will still be liable for anything that stays in joint names.
6. Close off old credit card accounts
If you are a lover of credit card balance transfers, then don’t forget to close off the old accounts. If you don’t, you could end up with having tens of thousands of pounds of potential credit against your name and lenders may be concerned at how much debt you could get yourself into with these. A few unused credit cards are no problem though; they just help to show that you manage your finances well.
7. Get a credit history
If you have never needed to borrow money, then you might be well advised to borrow some anyway, in case you’d need to borrow in the future. I once knew a wealthy man who couldn’t get a mortgage when he needed to, because he had no credit history at all. It sounds daft, but it’s true; lenders would rather see some history of well managed debt, than none at all.
8. Never miss a mortgage payment, if you can help it
When times get tough and you can’t pay all the bills, the mortgage is the last thing you want to default on. Talk to your mortgage lender as soon as possible and see if they can help with a repayment holiday, or reduced payments. They are not usually as unhelpful as you might think, and a missed mortgage payment can really dent your credit score.
9. Pay bills on time
Many people like to leave paying every bill until the very last moment or until the red reminder arrives, but then it is easy to make a mistake and pay late. Just one late credit card payment can impact on your credit rating, so pay bills quickly, when you can afford to do so.
10. Reduce the total amount of your debt
How much you already owe, accounts for 30% of your credit rating and that amount includes all those little debts like store cards, that you don’t often think about. If you know that you will soon be applying for further credit, try and get down the total amount that you owe, even if that means selling something and then buying a new one again later!
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