If you have a poor credit history, it can seem as if you will never be able to get back on the side of the angels and obtain the credit most of us need to make life that little bit simpler.
The reality is that things are never that bad. It may take time, but anyone who is determined to do so can repair their credit history – and keep it clean.
Please take the time to read all of the information below, as it will give you some idea as to how it all works!
As everyone is no doubt aware, one of the biggest hurdles in our Industry at the moment is the ability to obtain Finance. Here are a few tips that MAY help you.
Being turned down for credit is, simultaneously, one of the most humiliating and annoying experiences that can befall anyone. It really would help you to quickly read through the Information.
How dare they turn you down?
Inevitably, when something like this happens, the immediate temptation is to think that something has gone wrong at the other end of the application process. It must have been a technical mistake. Or the information held about you is wrong. Or they have the wrong person altogether.
Of course, any one of these explanations may be true. But it is equally possible that the company that turned you down had the right information. And the information – maybe rightly – suggested that you were a high risk. By the way, don’t think the problem is unique to you: the Credit Card Research Group estimates that, depending on the issuer, between 40 and 60% of all applications are turned down, often for reasons that seem hard to understand.
So how can you overcome the problem?
This article will give you five simple and practical tips on how to improve your credit rating. But before we do so, it is important to understand how credit rating actually works.
How does credit scoring happen?
Before they agree to lend money, or finance your hire-purchase deal, all providers go to one of three main credit reference agencies to find out more about you.
Lenders use that data (large amounts of various bits of information) as a large element of the scoring system they use when considering a credit application.
For example, this information includes:
- People on the electoral register at your address(es)
- Your credit agreements, including details of any late payments and defaults which can be held for up to six years
- Court judgments and bankruptcy orders against you - these are also be held for six years
- People living at the same address as you, such as your family, plus information on their credit history
The reference agency itself is not “blacklisting” you. It simply provides information. It is then up to the credit provider to operate its own scoring system based on the information it has received. This means that depending on the individual criteria applied by a provider, you may either be accepted or turned down.
How to improve your credit rating
1) Check that it is accurate
The Data Protection Act entitles you to know what is in your credit report and, where necessary, challenge its accuracy.
If you want to do this, send your name and address, together with a cheque or postal order for £2.00 and a list of your previous addresses over the last six years to each of the agencies.
Callcredit, Consumer Services Team, PO Box 491, Leeds, LS3 1WZ
Equifax, Credit File Advice Centre, PO Box 3001, Glasgow, G81 2DT
Experian, Consumer Help Service, P.O. Box 8000, Nottingham, NG1 5GX
2) Correct any inaccuracies
If there is a mistake on your file, you cannot simply ask for it to be corrected by the reference agency itself. You must contact the organisation that provided the information. The reference agency can help with details, including an address.
Then write to that organisation and ask it to correct any incorrect details about you and to inform the credit reference agencies. You will have to provide a
written reason, with a factual explanation for that organisation to correct any wrong or misleading information about you.
For Example.
If there are entries that involve credit account information (lenders or credit card issuers for example) you must contact the lender directly. If the information concerns a bankruptcy that occurred several years ago, contact the Official Receiver who dealt with the case. Ask for a letter to say you have discharged your bankruptcy.
If it concerns a County Court Judgement (CCJ), contact the County Court directly and ask for a "certificate of satisfaction" to the effect that you have paid the debt concerned.
If there are entries on your personal file that relate to a family member, partner or someone else living at your address and you have had a financial relationship with them in the past, you need to have a "disassociation" created. This breaks the link between you and anyone else at the address who may have a poor credit history.
4) Build a credit history
Ironically, one of the reasons why many people get turned down for credit is that they lead blameless financial lives.
There is nothing lenders or credit card issuers like better than a good credit record where borrowers show they can successfully repay amounts they owe
and manage credit and debt. But maybe you don’t borrow money, you pay your bills on time, don’t use a credit card and only have one bank account.
This means that when a credit check is carried out, there’s nothing there for a credit provider to see whether you would be a good or a bad credit risk – so you
get rejected.
How do you deal with this? Here are a few tips:
- Apply for a small overdraft on your account, maybe even a small loan. Pay it back religiously.
- Lenders check the electoral roll to confirm your name and address, so make sure you are registered with your local authority.
- One or two successful credit card applications could be seen as a sign of credit-worthiness. You may want to apply for one just for that reason.
Bear in mind that every time you apply for credit it leaves a "footprint" in your file which will be seen by other lenders and issuers. A large number of searches over a short period could signal over-commitment or even fraud, so you may think it more sensible not to apply until absolutely necessary.
5) Be honest when you apply for credit
Don't omit previous addresses. If you've moved a lot in the last three years, don't be tempted to leave out any previous addresses. This could be seen as an attempt to conceal unpaid credit at that address and treated as suspicious.
Be honest about your credit history. If you've been in difficulties in the past and been unable to meet your repayments, or you've got CCJs, make sure you tell your prospective lender.
Finally!
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