This post looks at some of the ways you can improve your Credit Rating.
Once you and I get out of debt we may be looking to get a mortgage and a good clean Credit Report will really help us.
On that basis I will write a little about the ways you can improve your credit rating.
There are no quick fixes but the suggestions below will certainly help repair some of the damage caused by debt.
Repay your Debts
If you have a lot of debt like me then your first priority should be to repay that debt.
If your debt problem is like mine then there is a good chance that you have some defaults and late payment information recorded on your credit file.
This bad or adverse information has a negative impact on your Credit Rating. In most cases it means your applications for credit will be declined.
Each time you repay a debt in full, the default is marked as satisfied on your Credit File. Whilst this might not help much when you are applying for a mortgage, it can help in other ways.
For example, if you were to apply for a credit card for bad credit, your chances of being approved are increased. Personally I cannot trust myself so will be steering clear of this. However having a form a credit may help to improve your Credit Rating. Assuming you manage it responsibly.
Settling your debts shows future lenders that you are more responsible with your finances. As a side note, any defaulted recorded on your credit file will be removed six years after the date it was registered.
Get on the Electoral Roll
Checking that you are on the electoral roll is a standard check for most financial products. It allows the finance company to confirm you do live where you say you do. You can register by visiting the About My Vote Website.
Check your Credit Report
Checking your Credit Report is always a good idea. It is possible that some of the information recorded on your credit report is incorrect or inaccurate.
The three main Credit Reference Agencies in the UK are: –
- Call Credit
You can access your credit report online, or by writing to each credit reference agency individually. There is a charge for obtaining your credit report. Most online reports do include information from the other Credit Reference Agencies as well.
If you do indeed find that there is inaccurate or incorrect information, you have a right to have that information corrected. You should raise a dispute with the original company who are reporting the incorrect information.
Again some online Credit Report providers will assist you with this process.
Make your Existing Account Payments on time
If you are in debt and you still have some accounts you pay then make sure you pay them on time. These accounts could prove useful once all the adverse information has been removed from your Credit File.
The reason these accounts will be useful is that they will show a good history of payments. If the account is still in use when your Credit Rating improves then you will have some Credit History as well.
Time is a great Healer for your Credit Rating
The best improvement to your Credit Rating comes with the passage of time. In time the adverse data reported on your credit file will be removed. This will then leave you with a good clean report.
However, be careful not to get into debt again. During my first debt problem, I repaid all my debt and six years later my Credit File was clean. Shortly afterwards I started taking out Credit again and I am now back to square one, in debt and I have a bad credit score.