If your credit rating has taken a knock, it’s important you take steps to improve it.
It may not be something you spend much time thinking about, but your credit rating is a vital part of your finances.
It is the key that unlocks all the best credit card deals, and will play a key role in your mortgage suitability, so it’s worth taking the time to ensure yours remains in an excellent condition.
Take a peek at your report
The first thing you need to do is find out what your rating is.
You can purchase a copy of your report from one of the credit reference agencies, like Equifax or Experian, for around £2.
It’s a fairly simple document, so it should be easy identify any possible mistakes. If everything looks fine but your score is low, it’s time to take steps to improve it.
Watch where you apply
Getting yourself a credit card, using it often and then repaying that debt immediately is a great way to do this.
The irony is that your poor credit rating will actually put lenders off of giving you a card in the first place. Whatever you do, don’t blindly apply for every card you see in the hopes that one will prove successful.
Every application you make is noted on your credit record, and if you apply for too many in a short space of time, this hurts your rating and makes each application less likely to succeed.
Get the right card
Thankfully, there are a couple of credit cards developed specifically for people trying to rebuild their credit rating.
These cards are offer terrible value, with very low credit limits and extortionately high interest rates, so it’s essential you tread carefully when using them.
Make small purchases on the card that you would have bought with your debit card/cash anyway – such as groceries – then clear the debt immediately (the cards do offer up to 56 days interest free, but the longer you wait, the greater the chance you’ll forget to pay it off).
Vanquis or Capital One
For those with particularly a poor credit history, the Vanquis card is an option, but it charges between 40 - 60% interest, so you could end up in a world of trouble if you’re not careful.
For those with a slightly better rating, or are starting out for the first time, the Capital One Classic credit card is more suitable, with a 34.9% APR. After about six months of using one of these cards, you should be able to get your hands on a more competitive offering.
Using credit cards is just one of many tricks to rebuild your score. Read more about the others here.
