A DAY IN THE LIFE OF SOMEONE IMPROVING HIS OR HER CREDIT RATING

What is a bad credit rating and how can it be improved?

What is bad credit?• When you’re looking to get a loan or mortgage, lenders will often run a credit

check on you

• This credit check will run through your financial history and a decision on

whether or not to lend to you will partly be made based on the data they receive

• If you’ve struggled in the past with repaying your bills or keeping up with your

payments, you could find yourself with a bad credit rating and the company may

choose not to lend to you

• Having a bad credit rating can feel like you have a black cloud hanging over

your head

• Being unable to pay off your debts could lead to your credit score decreasing

even further

• This could prevent you from receiving any kind of credit

Bad credit could prevent you from getting…

• A Loan – Student, business, personal or otherwise, with a bad

credit rating you could have a tough time getting a loan from

any of the high street banks

• A Mortgage – The same goes for mortgages. If you’re looking

to move then you might want to take a look at your credit rating

first

• Cheap Car Insurance – Drivers with bad credit ratings will

often be forced to pay higher insurance premiums when

compared to drivers with good credit – even if you have a

pristine driving record!¹

• A New Phone – Looking to get the latest smart phone on

contract? You’ll find it tougher with a bad credit rating

• A Good Job – Employers are entitled to check candidates’

financial history before deciding whether or not to employ them

¹http://www.consumerreports.org/cro/car-insurance/buying-guide.htm

What causes bad credit?

• You’re not registered on the electoral roll

• You’ve been declared bankrupt or received a CCJ (CountyCourt Judgement)

• Being consistently late on repayments, or missing paymentsaltogether– this includes loans, mortgages, phone and utilitybills

• Exceeding your overdraft or credit limits – this is a keyindicator that you’re not in control of your spending

• Having a high level of debt

• Applying for credit from several different lenders at the sametime

• Gaps in your housing or employment history – missinginformation suggests a lack of stability

Note: If you’ve never borrowed money or used any form of credit,there won’t be any information in your credit file. While this mightnot be a ‘bad’ credit rating, you may still be rejected as you can’tprove you’re not a risk to lenders.

There are a number of causes that can lead to you being given a bad credit rating. If one

or more of the following apply to you then you likely need to look into how you can

improve your financial situation:

How to improve your credit rating: Paperwork

So it’s time to get your credit rating in order, but where do you start?

You need to manage your debt and credit in order to figure out exactly

where you stand and what action to take.

• First of all you need to do some paperwork – Get hold of your credit

report and see what your current score is and whether or not there

are any mistakes

• Get a grip of your repayments – Get organised and try to clear off as

much remaining debt as you can. Organise a payment plan with

your lenders for regular payments

• Don’t miss these payments – Do whatever it takes, reminders,

calendars, alarms, just don’t miss them

• Ensure you have up-to-date information about your employment and

residential history – Banks will use this information to determine

whether you’re in a stable position to lend to

• Get on the electoral roll. If you’re not registered to vote, it’s less

likely that you’ll be offered any credit. You can register for the

electoral roll here

How to improve your credit rating: Credit cardsOne in five Brits have more than three credit cards in their wallet³.

Having this many cards could make banks wary of lending to you,

even if you’ve not accumulated any debt on them. If you have a lot of

credit cards banks could deem you as a risk because you have the

ability to go on a spending spree and put yourself at risk of not being

able to pay the money back and increasing your debt.

• Stop applying for credit – The more you apply for credit, the

further your credit score could decrease, leaving you more likely to

get rejected over and over again

• Reduce the credit you already have available – get rid of

unnecessary credit cards and store cards that don’t add

anything positive to your credit history

• Contact the provider directly and don’t get won over by their sales

talk - you’re on a “credit diet” remember!

• Start looking at ways in which you can spend sensibly to improve

your credit rating

³http://www.equifax.com/about_equifax/newsroom/en_gb?ncId=1187896722503

Finding the right option• Find a card that works for you. A credit card

doesn’t need to be your only option. If you

struggle with managing your finances and

making payments on time, a prepaid card

might be a better option

• Look for features that will benefit your

situation. Whether it’s free payments and

transfers or 24/7 access to your account via

online banking to monitor your spending,

there’s something out there to suit your needs

• Adding a credit building feature to your

account will allow you to pay your monthly

fees in the form of a loan repayment plan.

Keeping up with these payments could show

lenders you can be trusted with credit in the

future

Don’t expect a quick fix

Even when you’ve done all of these things, don’t

expect to go from credit nightmare to loan

heaven over night. You need to show that your

financial management is consistently good over

a period of time in order to rebuild your rating

and prove to lenders that you are no longer

such a high risk prospect.

• The longer you keep up these tactics the

better your credit score will become – opening

you up to much more attractive deals on the

market

• Don’t get sucked in - keep up your good

habits and don’t get back into the bad books

with the creditors

Sources

• http://www.which.co.uk/money/credit-cards-and-loans/guides/your-credit-

report-explained/why-do-i-have-a-bad-credit-rating-/

• http://www.equifax.com/about_equifax/newsroom/en_gb?ncId=11878967225

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• http://local.direct.gov.uk/LDGRedirect/index.jsp?LGSL=364&LGIL=0

• http://www.moneysavingexpert.com/loans/credit-rating-credit-score#improve