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Top Tips for improving your credit rating

Published: 29 October 2014

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Author: Carl Shave - CEO and co-founder
Last updated: 14Jul2024

What many people don’t realise is that your credit rating and credit history are two different things. Often we hear people saying “No one will lend to me, I have such a bad credit rating”. Every company will give you a different credit rating, and it is your credit history that is likely to hamper you in receiving credit in the future.

So what is credit rating?

Your credit rating, or credit score as it is sometimes referred to, is a figure used by lenders to help them determine if you qualify for the particular line of credit you are after. There are several different facts that will affect your rating, either positively or negatively. Such as:-

  • Public records
  • Your Payment History
  • How much you have outstanding
  • Credit History searches
  • How long you’ve had credit for

So my credit history is…

Have you ever had a loan or credit card in the past? Or have one currently? Then this means that you have a credit history. It describes how you use your money, and credit companies collected this information and put it into a credit report. It is based on this information that a company will decide if you are a satisfactory risk. So can you improve your credit history and credit rating… of course you can, over time. However, it won’t happen overnight. Here are some top tips on how to improve your credit rating.

Short Term Steps

STOP applying for credit

Sometimes it can feel you are stuck in a cycle where, no matter which finance company you apply to, you are being rejected. One reason this could be is because you have done exactly that, applied to lots of companies at the same time. Lenders don’t look kindly on this method, every time you make an application it is leaving a footprint on your credit report. If you have a poor credit history but do require a line of credit, ask companies to do a soft search. This means that they will still check your credit history, but it won’t leave a lasting mark. This is because the lender that does the search and you are the only ones who can see it. However, if you have financial difficulties, applying for more credit may not be the answer.

Join the Electoral Register

The electoral register isn’t just all about politics, finance companies check the register to verify your details. Not being on the register could be hampering your efforts to get credit.

Cancel unused Credit Cards

Lenders do not only look at your ability to payback credit, but they also look at the amount of credit you have access to. So close those old accounts that you no longer use, lenders will take this into account. It also helps you become less at risk of being a victim of fraud.

Update your details

Make sure that all your financial commitments are under your most recent name and address.

Check your details

Make sure that all your details on your credit report is correct. Someone could have opened up lines of credit in your name without you noticing. Also make sure that accounts that are closed down or settled are marked on the report as well.

Long term steps

Pay on time

Paying on time will massively help your credit rating. Not only will this reduce the burden on you, but it also shows lenders that you are a sensible borrower, as you are able to manage your current commitments. Setting up direct debits is an easy way to ensure that you pay on time and don’t forget.

Credit Builder Credit Cards

If you have a poor credit rating then a credit-builder card could help. However, they normally have a high interest rate, typically over 30% in interest a year. They also have a maximum credit limit of £500. However, if you don’t make the monthly repayments, this effort to improve your credit rating will be destroyed. As with all lines of credit, it is important to think about the decisions carefully. They shouldn’t be taken lightly and in some instances, adding additional credit to your commitments could prove detrimental. If you are struggling with debt, it would be advisable to talk to someone first, such as the Money Advice Service. They can give you free and impartial advice as well as talking you through ways in how best to manage your finances and to budget.