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Friday, 19 September 2014

How to achieve a good credit rating

If you’ve experienced County Court Judgements, bankruptcy orders or missed payments, you could find it hard to get credit from mainstream lenders.

Unfortunately, if your application for credit is declined, it can make things worse, as your application is recorded on your credit file and each refusal can make lenders more wary of lending to you.

So, how does credit rating work – and, more importantly, what can you do to boost your credit score?

Your rating itself essentially doesn’t tell you much – and different agencies use different rating systems.

There are three main credit reference agencies who give lenders information on financial track records – Experian, Call Credit and Equifax. But they don’t decide whether or not to accept a prospective borrower.

Agencies gather information from sources including how promptly past debts have been settled, County Court Judgements and the Electoral Roll. The final decision is down to individual lenders, each of which will have their own criteria for approving or declining credit.

If you’re refused credit, the lender by law should state the reason for decline. If this was related to something on your credit report you’re entitled to review your credit report to make sure the information is accurate.

How to improve your score

The good news is there are quite a few basic things you can do:

  • Check your file doesn’t contain any errors.
  • Register on the electoral roll at the right address, and ensure all your debts are registered to the correct name and address. (However, it’s a false perception that particular addresses are ‘blacklisted’ by creditors.)
  • Apply for credit you are likely to be approved for, and don’t make too many applications at once. Remember that even things like mobile phone contracts can affect your score.
  • End any credit agreements you no longer need.
  • Ask lenders initially to do a ‘quotation search’ on you, in which you will be quoted a rate, rather than a ‘credit search’.
  • Apply only if you are sure you fit the profile of borrowers the provider will lend to.
  • Keep up with payments on any outstanding debt – talk to the lender if things get difficult.
  • If you are involved in joint finance arrangements with a partner with a bad score, that can impact upon your own rating. Let the relevant agencies know if you split up.
  • Lenders like to see applications from people who have lived at the same place for a long time, are in long-term employment and have a long history of being with the same bank.
  • Don’t keep applying for credit if other lenders have turned you down.

Don’t panic if your credit score is not what you want it to be. When it comes to credit cards UK providers are often likely to be able to help you have your application accepted.

aqua are one example of credit building credit cards from a responsible, reputable provider. So if you want to get your finances back on track, or have previously been declined credit, aqua can help.

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