How to rebuild your credit rating
Most people will have struggled to get credit over the past couple of years and even
now the banks are said to be lending again, many are still struggling to get loans, finance or credit cards.
This could be due to a dip in credit score and even the most conscientious of borrowers may be surprised to learn the ways in which their credit scores can be adversely affected.
Here are a few factors that can have an effect on your credit rating, some being more obvious than others:
Making late payments on credit card bills, finance arrangements, utility bills or mortgage payments.
Being close to the limit on your credit cards or overdrafts.
Having a short credit or no previous credit history.
Applying for a number of credit lines in a short space of time.
Not having a variety of credit lines, for example, installment loans (fixed payments such as car finance) and revolving loans (unsecured borrowing such as credit cards).
Declaring bankruptcy.
So if you do have, at least, a few blemishes on your credit rating, what can you do to build it back up?
Get paying
This may sound obvious and may sound impossible but the worst thing to do is bury your head in the sand and hope that your debts will go away.
If your debts are such that you can not pay them off in one go, or even if you're struggling to meet your minimum payments, speak to your lenders to sort out a payment plan so your debt is continually being serviced.
If your debts have gone awry to the point where you have county court judgements in your name be sure to pay these off as quickly as possible and, once the debt has been repaid, be sure that records at the Register of County Court Judgments are amended.
Get saving
When you seem to owe out more money than you're bringing in opening a savings account will be the last thing on your mind, but it is a great tactic in rebuilding your credit rating.
Lenders look at bank accounts as a sign of financial stability, particularly savings accounts, so by opening one and putting in just a nominal amount each month, it sends out signals that you're taking care of your finances.
Get borrowing
If you've never borrowed before then, no matter how carefully you've managed your money, you'll be invisible to the credit agencies and will struggle to get credit.
Similarly, if you've stopped using your cards or got rid of them altogether then the credit referencing agencies will see this as a bad sign and adjust your credit rating accordingly.
The key to building up a credit score is to regularly employ your means of credit. This could be through making the odd credit card purchase or taking out a monthly mobile phone contract.
But beware, having too many credit cards at once will have an adverse affect on your credit score as lenders will see you as a financial risk rather than someone trying to build credit.
Also, you will be penalised for missing any minimum payments and it's always best to pay off a credit balance in full so as not to incur interest charges.
And, even if you already have a low credit score, there are a number of bad credit credit cards on the market to help build your credit rating.
Get help
If your debts are such that you feel you're in over your head, there are a number of organisations set up for debt management advice.
National Debtline
www.nationaldebtline.co.uk or 0800 808 4000
Consumer Credit Counselling Service www.cccs.co.uk or 0800 138 1111
For a fee you can order a copy of your credit file from one of the three main credit referencing agencies:
Experian www.experian.co.uk
Equifax www.equifax.co.uk
Call Credit www.callcredit.co.uk
How to rebuild your credit rating
By: Les Roberts
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