How to improve your credit rating

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Banks have started to again worry about the impact the recession has had on their finances. Royal Bank of Scotland has recently revealed that it’s back in the red after charting pre-tax losses of £1.4billion from the summer to September.

With this in mind, banks are now more wary to who they are giving loans and mortgages to as they don’t want to see another financial mishap.

We take a look at how you can improve your credit score so that you have the support you need when you need it.

What you should avoid

Never use a private loans company

Over the last few years, the media and police have exposed hundreds of fraudsters just dying to take your well-earned cash at unacceptable interest rates.
Some recorded have been well into the thousand per cents, which makes payback virtually impossible.
Unfortunately, more people have been sucked into buying loans from these people as they promise a ‘quick-cash-flow’ option, but this has led to an all-time high of repossessions as consumers can’t afford to pay everything back.
You should seek advice from Citizen’s Advice, Consumer Credit Counselling Service or the National Debtline if you have any concerns.

Watch how many times you apply for credit

The amount of times you apply for credit is registered and whether or not that application is successful, every bank will look at this for your credit rating.
The more you apply, the less likely you will be successful in your application, so try and reduce it by buying items out right, if possible, and only applying for credit you know you will pass for.
This can be done by searching various comparison sites.

What you should do

Get a credit card – and use it

Many banks won’t actually give you a mortgage unless you have a credit card. By owning one, it shows you are responsible to have it and by using it and paying it off on time, it shows you are good with money.
Even minimal payments, such as buying yourself a treat at lunchtime or purchasing small gifts online, can show the mortgage lender that you can be trusted to be loaned some money – just as long as everything is paid within the appropriate time.
Buying items online with a credit card automatically ensures that you have an insurance on the item, so that if you are purchasing from a fraudster your money is safe.

Make your vote count

Banks look at the electoral role for confirmation of your name and address. If you are not signed up, they won’t have proof of this.
It is especially important to update this should you move home and to also alert your bank of any changes of address as this can affect your credit score.

Most importantly – pay on time!
Any missed or late payments go against your credit score and this is the most damaging evidence a bank would use when considering any application.
Lenders will look at not only your household bills, but any mobile phones and other purchases you pay credit on.
You should contact credit reference agencies, such as CallCredit, Experian and Equifax, who will all be able to show you your current credit score and you can therefore assess where you need to improve.