Sunday, 19 February 2012

Five credit score boosters

If your credit score is low, you are unlikely to be accepted for competitive credit card, loan and mortgage deals, meaning that you will pay more to borrow - if you can borrow at all.

Luckily, there are lots of ways that you can improve your credit score, even if you have damaged it in the past. Here, we highlight five of the best. 

1. Check that you are on the Electoral Roll
Not being listed on the Electoral Roll will make lenders view your application with caution, so if you are not already listed, then perhaps the easiest way to improve your credit score is to sign up to vote.

If you are not eligible – because you are a foreign national for example – you should also ensure that this is not working against you by sending all the credit reference agencies proof of residency.

2. Make sure your personal information is up to date
It is in your interests to make sure that the information credit reference agencies such as Equifax hold on you is accurate and up to date. Otherwise, you could well be rejected for deals through no fault of your own.

Having more than one address on your file, for example, can stymie credit applications, while being "financially linked" to someone with credit problems can also damage your score.

If your partner has a less-then-perfect credit file, it is therefore a good idea to keep your finances completely separate.

3. Clear your outstanding debts
Paying off any debts is a good way to increase your chances of being accepted for mortgages, credit cards and loans in the future.

As the banks are also often wary of people with lots of loans or credit cards – even if they do not owe a lot on them - it is sensible to cancel any unused credit cards and accounts too.

4. Be a model customer 
If you have made mistakes in the past, the best way to rebuild your credit score is simply by keeping a close eye on your existing accounts to ensure that you never miss a payment or go over your credit limit.

If, however, you are struggling to keep up with your minimum payments, remember that changing your repayment schedule is preferable to defaulting.

Consequently, you should contact your lender as soon as you realise you will be unable to meet your commitments. And don't be afraid to seek help from a debt charity such as the CCCS if you are really in trouble.

5. Build a credit history 
Poor credit scores are not only reserved for those who have mismanaged their accounts in the past.

Having no history of borrowing can also result in you being rejected by lenders because they have no repayment track record to judge you on.

If this is the case, why not take out a credit-building card designed to help those with little experience of borrowing prove that they can manage the repayments. Cards of this kind include Barclaycard Initial at 29.9% and Capital One Classic at 34.9%.

Remember though that you will need to keep up to date with your repayments both to avoid huge interest charges and improve your credit score.

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