Mortgages & Home Finance How To Improve Your Credit Rating

Date Published:

22/06/2009

Remember when the post was full of letters begging you to take out a new credit card or loan (whether you wanted it or not)? Not any more. Companies are getting picky about who they lend to and relying heavily on data supplied by credit reference agencies. So it’s very important than your credit history is accurate and positive. How can you check yours?

By Caroline Bloor

With the increase in ID theft, blemishes on your record may not even be your fault, and, after all, it’s not just your reputation that’s at stake. 'A credit rejection could have knock on effects for borrowers when it comes to taking out all kinds of financial products including a mortgage,' says Sean Gardner of MoneyExpert.com.

How Do You Check Your Credit History?

Under the Data Protection Act, credit reference agencies must provide you with a written 'Statutory Credit Report' for a fixed fee of £2. You need to contact all three agencies: Experian; Equifax and Callcredit.

The statutory report contains basic credit details but the agencies will provide you with more detailed information –including instant and regular online access to your file for a higher fee (around £5 a month).

You can obtain a copy of your credit report any time. Most people do so when they are declined for credit or they discover personal information has been stolen. Otherwise, an annual check should be enough.

What Does A Credit Report Contain?

• Name and date of birth
• Current and recent addresses
• The electoral register
• Credit payment history
• County Court judgements
• Bankruptcy and administration orders
• House repossessions

Along with details of your income, employment status and assets, lenders use this information to assess how well you have handled credit in the past and therefore how much of a risk they are taking by lending money to you.

Would YOU Lend You Some Money?

Once you’ve got hold of your report, make sure the information on your credit file is up to date and accurately reflects your circumstances. (But you can’t get things removed just because you find them embarrassing).

You have the right to dispute inaccuracies and have them corrected or to have something explained (such as if you missed a repayment due to illness rather than an inability to pay).

Check for any evidence of ID fraud such as accounts being set up and used that you have no knowledge of.

Ensure that you are registered on the Electoral Roll at your current address.

If possible, make more than the minimum payment on credit agreements every month to help build a positive payment history.

If you have paid a County Court Judgements, make sure the settlement is recorded on your credit file.

You may struggle to borrow money if you have never taken out credit before or if you already have what the lender considers to be too many loans or credit cards.

Avoid carrying a balance that is more than 30% of your credit limit - creditors may view it as excessive debt and that you may not be able to keep up with repayments.

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