Believe it or not, having no credit rating at all isn’t necessarily a good thing.
Sure, none of us want to be snowed under with bills we can’t pay and in constant fear of debt collectors knocking on the door, but when lenders come to decide on your application; it helps if you have some form of rating for them to base a decision on – and the higher the better.
So here are 6 ways to ensure that you are achieving the best credit rating possible, as well as what to do if you’re not.
1. Review your credit report regularly
Every time you make an application for credit; whether it’s a new credit card, loan or even a mobile phone, the lender will study your credit rating before progressing with your application. But if a mistake has been made with your credit rating it’s important that you correct it as soon as possible so that you aren’t being punished. If you are no longer with a partner or living at an address that could be reflecting poorly on your credit score, then make sure you change these details as quickly as possible.
If you feel any information is incorrect or that there may be an explanation for a poor credit score (such as illness, divorce or other circumstances), you can you can add a “Notice of Correction” to your credit report.
2. Make your repayments and pay on time
A poor re-payment history can work against you when it comes to securing further credit. If a lender sees that you have been missing payments or even not making them at all, then this could have a negative impact on your application. Pay at least the minimum amount due each month and make sure not to exceed your agreed credit limit – as this information can stay on your credit report for as long as six years.
3. Register to vote at your current address
Lenders will use the electoral role to prove that you are who you are and you live where you say you do. Make sure you are registered to vote at the address that you currently live to ensure you are not paying the price for someone else’s poor credit rating – literally.
4. Close any old accounts
When it comes to your bank and credit card accounts, it’s always better to have fewer well-managed accounts than lots of accounts that have been opened and never used. It’s always wise to close accounts that you don’t use – as lenders don’t just look at what you owe, they also take note of credit that is available to you
5. Protect your identity at all times
Any strange activity appearing on your statements could suggest that you have been the victim of credit card fraud. As well as the obvious problems this can cause in terms of cost and disruption; large and irregular transactions can also have a bearing on your credit rating. If you feel you have been the victim fraud then you should contact your lender or card issuer immediately.
6. Don’t apply too often
When you apply for credit you leave what is called a “Credit Footprint.” This shows lenders where and when you have applied for a loan, card or any other form of credit. A high concentration of applications could suggest to anyone looking at your credit rating that you are facing financial hardship and could ultimately affect an application. Don’t adopt a scattergun approach; think long and hard about your requirements and only ask for what you need.
For more information on credit, view one of our earlier posts on ‘Things to consider before getting a credit card’.