08/09/10

How to improve your credit rating

Having a good credit rating should boost your chances of getting the best deals when it comes to borrowing money.

When applying for a loan, your potential provider will first check your credit record to see if it thinks you're suitable to receive money. So if you have a bad credit history, you could find it harder to get the most competitive deals.

There are steps you can take to improve your credit rating.

You can get a report from one of the three main credit agencies: Experian, Equifax and Callcredit. By law, all agencies must supply consumers with a one-off report for £2.00, but you can also pay a bit extra for online access.

Your report won't just display your current arrangements, but any credit limits, agreements and missed payments from the last six years. This will also include information if you are linked to any other individuals such as through joint accounts. Bear in mind if the person you are linked to has handled money poorly, this could affect your own rating.

Make sure all the information in your report is correct. Contact your agency if anything looks strange to you or you suspect fraudulent activity. It will investigate any discrepancies or potential ID theft.

Where possible, pay off debt. Setting up direct debits is a great way of ensuring you make regular payments.

Also make sure you are registered on the Electoral Roll as this is one of the easiest and most significant ways to boost your rating. If you've moved, ask your new Local Authority to ensure this is up to date.

Make sure to include statements to explain missed payments. Although lenders don't have to take this into account, you can at least have your say.

Finally, beware; applying for credit too often can damage your report. Each time a lender checks your report they leave a footprint on it which can warn off other lenders. On the flip side, lenders like to know that you are capable of receiving a loan and paying it back, so not applying for credit at all will also have an adverse effect to your rating.