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10 ways to fix your credit rating
With Britain’s personal debt topping £1.2 trillion, 76 per cent of 16-34 year olds see debt as an inevitable part of life (Mori). And as debt has become more acceptable, increasing numbers of people are finding themselves struggling with poor credit ratings.
While many people think that there’s nothing they can do; that they simply have to sit and wait, there are practical steps that you can take to improve your credit. Follow our guide to help you get out of bad credit but note that this is not legal financial advice.
1. Check your rating
You can use a credit checking agency to see what’s on your credit file. For a basic fee they will tell you what is on your file, or for a higher amount, they will talk you through exactly what you need to do to resolve any issues on your file. Prices start from around £1. Try agencies like Equifax (www.equifax.co.uk).
We don’t recommend using a credit repair company – you can get free or much cheaper advice elsewhere.
2. Register to vote
Signing up to the electoral roll not only allows you to vote in elections; it is also used by credit reference agencies to check your credit rating. This means that if they can’t find you on the register, you’re likely to have difficulty getting a loan, a mortgage or even opening a bank account.
3. Utility bills
Getting utility bills in your name shows that you have a fixed address and can also be used as an indication that you’re paying your bills on time. Use direct debit whenever possible as this ensures that you don’t miss any payments.
4. Apply for credit
While you don’t want to be seen to be inundated with credit cards, loans and bank accounts, it is a good idea to have some. Applying for credit, and managing it properly, shows that you can cope and that you are reliable. This in turn builds up your credit rating.
5. Cut your cards
At the same time, you should ditch any credit cards that you don’t use. With so many people taking advantage of zero per cent balance transfer offers, lots of people now have two or three unused cards lying around. Closing the account will update your file and show that you have fewer cards. The same goes for unused bank accounts. It’s also a good idea to get in touch with a credit rating company to let them know when you’ve cleared an account to be sure that it has been removed from your file.
6. Look secure
When applying for credit, simple things like having a landline number can increase your chance of getting what you want as it gives the impression of being secure. Making sure that you fill in your details properly on an application is also going to improve your chances of getting credit.
7. Don’t be late
Make sure that you pay your existing bills on time. This doesn’t just apply to credit cards and loans, even things that you think of as amenities, like your gas, electricity and telephone bills are forms of credit. Not paying your bills on time shows up on your file and will damage your credit rating. Direct debit can ease the whole process, and you will usually save a couple of pounds on each bill by paying in this way.
Just make sure that you know when the money will come out and that there’s enough in your bank account, otherwise you will be charged by your bank and won’t be doing your credit rating any favours.
8. Don’t be desperate
Even if you are. Applying for six loans in a week simply shows companies that you’re in a dire situation – a sign that you’re bad with money and that you might be a liability.
9. Build your credit
Try a “credit building” company like Vanquis (www.vanquis.co.uk), or Capital One (www.capitalone.co.uk). They offer credit to people who need to build up their credit rating, but as they are taking a risk with you, they also charge very high interest rates – as high as 60 per cent APR, so think carefully before taking out a credit card with one of these companies.
10. Phone around
Britain’s huge consumer debt has given birth of a number of charities and organisations that offer free advice on getting out of debt and improving credit ratings.
Get in touch with the Consumer Credit Counselling Service on 0800 138 1111 or the National Debtline on 0808 808 4000 (see related links).
You can also contact us for advice and credit card and loan comparisons.
