Introduction
Did you know that improving your credit report can be the key to unlocking a world of financial opportunities? Whether you’re dreaming of owning a home, getting that shiny new car, or simply wanting to qualify for credit cards and unsecured loans with better terms, your credit report plays a pivotal role. The good news is, you have the power to take control of your credit destiny, and it all begins with a few simple steps.
Maintaining a strong credit report and financial responsibility is crucial and while these tips are vital, it does not mean that you will necessarily be declined for a mortgage or other credit facilities, but is likely to reduce your pool of potential lenders. That’s why it’s important to use a mortgage adviser, as they can assist in finding a suitable lender without adding any further negative impact to your credit report.
Let us walk you through some invaluable tips to help you whip your credit report into shape. But here’s the kicker: some of these strategies should be set in motion months ahead of any credit applications. So, why wait? Let’s start today on your journey toward a brighter financial future.
Credit Reference Agencies (CRAs)
There are three main consumer CRAs in the UK and these are;
Equifax – http://www.equifax.co.uk/
Experian – http://www.experian.co.uk/
TransUnion – https://www.transunion.com/
CRAs hold information on you such as the way you maintain credit and service accounts and information from public records like the electoral roll and insolvency register.
1. Check your credit report!
Obtain a copy of your credit file from all three credit reference agencies and check that all information held is up to date and correct. If you think there are any errors, take the relevant action to get it corrected.
You can also add a notice of correction to your file explaining the error.
Equifax – Notice of correction
Experian – Notice of correction
TransUnion – Notice of correction
While you can sign up for monthly subscriptions to obtain a copy of your report, you are entitled to a free report, which can be found under the statutory report request on the CRAs websites or using the links below.
Obtaining your statutory report will usually take longer to receive so, if you are tempted to sign up for the free trial, ensure you cancel prior to the renewal date if you do not wish to pay for the ongoing services they provide.
Checkmyfile uses data from all 3 CRAs (Equifax, Experian & TransUnion). Try it FREE for 30 days, then £14.99 a month – cancel online anytime.
2. Get on the Electoral Roll
The electoral roll is used by CRAs to verify your name and address. If you are not registered on the electoral roll this will have a negative impact on your ability to obtain credit.
To check whether you’re already registered or to register click here
If you are ineligible – for example, foreign nationals, you can send all credit reference agencies proof of residency and ask them to add a note to verify this.
3. Make sure your address is correct and consistent
Ensure that your address is current on your credit file and verify the accuracy of the information associated with all your active bank accounts.
Having an outdated or incorrect address may have adverse effects on your credit report.
4. Break with past relationships
Write to credit agencies formally requesting disassociation from any former partners with whom you shared joint finances. This proactive step prevents their credit history from influencing the outcome of your credit applications.
5. Consider a credit card
Rebuilding a poor credit score takes time, but a strategic approach involves responsibly utilising a credit card. By consistently paying the full balance each month, you demonstrate to lenders that you can manage credit responsibly.
There are many credit cards that have been designed specifically for people with bad credit so these could be worth exploring.
6. Don’t miss payments or pay late
Ensuring you make all payments on time is crucial for maintaining a positive credit report, as late or missed payments on credit or service agreements can adversely affect your financial standing. While having credit facilities can be beneficial, it is imperative to consistently meet your repayment obligations.
To streamline this process, consider setting up a direct debit or standing order to ensure you never miss a payment. For credit cards, it is advisable to pay the full balance to avoid interest charges. However, at the very least, covering the minimum repayment is absolutely essential. This proactive approach contributes to a healthy credit history and financial well-being.
7. Think about the timing
Despite adhering to these tips, the enhancement of your credit report might still require some time. For example, the removal of county court judgments (CCJs) from your record will take six years from the date it was registered.
8. Don’t apply for a lot of credit at once
Every application, regardless of its success, is documented on your credit file. To maintain a favourable credit profile, it’s prudent to space out these applications.
Aim for a minimum three-month interval between applying for various financial products such as current accounts, credit cards, insurance, mobile phone contracts, and personal loans. Rapid, consecutive applications may convey a sense of desperation to lenders, potentially impacting your credit score adversely.
9. Never withdraw cash on a credit card
This is explicitly highlighted on your credit file and is generally disapproved of due to its exorbitant cost. Engaging in such practices raises concerns, as it may be interpreted as a sign of financial desperation and an inability to manage within a budget.
10. Don’t reapply for credit after a rejection
Refrain from submitting another credit application immediately after a rejection. It’s crucial to review your credit files for any inaccuracies before pursuing additional credit opportunities. Even if you rectify an error later on, the lingering imprints from previous rejected applications can still impede your ability to secure credit.
Final Note
It is important to maintain a good credit report and be financially responsible, however, I understand that unforeseen circumstances may arise and that you do not always have time on your side. While these tips are essential moving forward, it does not mean that you will be refused for a mortgage or other credit facilities, but it is likely to limit the pool of potential lenders.
That’s why I am here – to help source a suitable lender without having any additional negative impact on your credit report.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Approved by In Partnership FRN 192638 November 2023
