Having a bad credit rating will restrict the amount of borrowing available to you, while you will also have to pay higher interest rates. There are many reasons why you might find you can’t borrow from mainstream lenders, including having County Court Judgements (CCJs) registered against you, loan repayment defaults, mortgage arrears, or failed utility direct debits. Other reasons could include not being on the electoral roll, making multiple applications for loans and credit over a short period, or being financially linked to somebody else with a bad credit rating.
Realizing something is Wrong
You may only realize that something is amiss when you apply for credit and are rejected. When this happens, not only will the application register on your files with the credit reference agencies, but it also means that you may have to turn to the subprime market – where you will pay higher interest rates and charges – to obtain credit.
If you’re turned down for a credit card, loan, mobile phone contract, or another form of borrowing, there are steps you can take to rectify the situation and put yourself back on the road to having a good credit rating. None of these provide instant fixes. At the very least, they will prevent your record from getting worse, while some may help you rebuild credit over time.
Rebuilding your Credit record
Get hold of your credit files. The two leading credit reference agencies – Experian and Equifax – maintain files on your financial history stretching back several years. You should get hold of those files to find out exactly what the problem with your credit profile is so that you can take remedial action. Both Experian and Equifax give free trials to new members, allowing them to download their credit history reports for a limited time.
When you receive your report, you will see that it contains information about your payment histories, outstanding balances, and arrears for loans, mortgages, credit cards, overdrafts, and mobile phone contracts. It will also show if you have any exceptional CCJs registered against you, your past and previous addresses and whether you’re on the electoral roll. Make sure everything is up to date on your files. If there are things you disagree with, get clarification and, if necessary, ask the credit reference agency to attach a notice of correction to show you had a valid reason for a late or missed payment.
Start making payments on time
It’s easy to get into a cycle of late repayments, but it’s essential to know that making payment even a day late may be registered on your credit files. Things get worse as the days in arrears tick by, and at a certain point, you will receive a default notice from the lender, which other financial institutions will regard as a black mark.
Start making your repayments on time, and this is shown clearly on your credit report and, over a year or so, negate the late payments you made previously.
Start building up your credit history
If you suspect you’ve been turned down you don’t have a good history, consider taking out either a credit or store card and start using them for everyday purchases and then paying off the balance in full every month. This will begin to build up a record of reliable payments, making it more likely that you’ll be approved in future applications.
In cases where it’s clear your credit rating is impaired because of poor financial management in the past, consider applying for one of the so-called ‘credit repair’ credit cards which will charge you a higher interest rate and have a lower credit limit but more relaxed acceptance criteria. Make sure you make the repayments on time every month.
Register to vote
If you’ve been in your house for more than a few weeks, you should ensure that you are on the electoral roll. If you are not, then it’s doubtful that you will be able to get any credit from mainstream lenders. The electoral roll is the first thing that financial institutions check when considering lending somebody some money. You can get onto the electoral roll online at the government’s website. If you’re worried about having your details sold, make sure that you opt-out of the edited electoral register, which is electronic and can be used for sales and marketing.
Use the soft search eligibility checkers
Every time you formally apply for any kind of borrowing, a record is kept of the searches carried out by lenders on your credit reference files. If you have too many of them, it can reduce your chances of being accepted for loans or credit cards, so it makes sense to minimize the number of times you do this.
The growth of the internet has led to numerous money and credit comparison sites, many of which have free credit eligibility calculators that can accurately predict which companies are likely to approve an application from you. When you use these services, no search is registered on your files, meaning that you can find the best rate or find a card that will help you start to rebuild your credit profile.
About The Author: Stefanos Anastasiadis: I love writing about anything related to home repairs in my blog HomeAdviceGuide. I always strive to provide the best possible and most accurate information to help homeowners. Visit HomeAdviceGuide for the most up-to-date advice on home improvement and repair project costs.