A good credit rating is essential if you want to qualify for the falling number of competitive loans, credit cards and mortgages.
Amazingly, the cost of lending has actually been on the rise despite the repeated cuts to the base rate, with the average APRs on both personal loans and credit cards rising notably in recent months.
Furthermore, jittery lenders are charging extremely high premiums on mortgages for those who only own a small chunk of equity in their homes, with 90% loan to value deals typically charging up to 5-6% above the base rate.
Get your credit report
With this in mind, it’s more important than ever that you maintain an excellent credit rating in order to gain access to the best deals available.
The first thing you need to do is get hold of your credit report from any of the credit reference agencies - like Equifax or Experian - and check for any possible errors.
Don’t worry; it’s a fairly short and straightforward document, so any mistakes will be easy to spot.
How to bolster your rating
Once you have resolved any potential issues, you need to set about boosting your rating. Start by checking you are on the electoral roll – if not, you’ll struggle to get any credit.
This is because credit reference agencies find all the information on you here. Get in contact with your local council to check.
If you have a lot of unpaid debt, this will obviously count against you, and the more you owe, the worse your rating will be.
Try to pay this off as soon as possible – settling a loan early will be well received by future lenders.
Limit your plastic
As for credit cards, it’s important you limit the number of active cards you own at any given time.
Even if you’re not using the cards and don’t owe a penny on them, the fact you have such a “long line of credit” available to you already looks bad. If you have more than two cards already, contact the provider/s and let them know you want to cancel the account/s (just cutting it up won’t work).
Don’t apply for credit too often
Speaking of credit cards, not that every application you make is noted on your credit record.
If you apply for too many in a short space of time, this hurts your rating and makes each application less likely to succeed. Should you be rejected more than once, stop, go back to step one and check your credit report for any problems or errors.
If you’re applying for a loan, another option is to ask each lender to carry out a quotation search rather than a credit search, as this won’t hurt your credit score.
Stability and responsibility are key
It’s not just your credit history that affects your rating. Lenders look favourably upon those who tend to have more continuity in their lives.
If you have lived at your current address for three or more years or stayed in the same job for a few years, your rating will increase.
According to the Debt Advice Bureau, changing jobs once in three years won’t blemish your record, but three or more jobs in the same period will.
Responsibility is another trait that will boost your rating, with homeowners given a higher rating than those who rent, as this shows you’re more likely to be able to handle large debt.
