If you’re looking to apply for a credit card, bank loan, mortgage, or car insurance package in 2013, you might need to improve your credit rating. This is a scoring system which many lenders use to assess whether you’re a suitable candidate for borrowing. Your rating will be damaged if you have defaulted on payments or fallen into debt, so it’s worth getting your finances in order to give yourself the best chance.
Improve bad credit
Once you’re in the red it can be difficult to get out. In fact, it’s often tempting to give up and dig yourself a deeper and deeper hole, but missing payments or violating the terms of a contract can leave you with bad credit. This might make it difficult for you to access extra funding in the future, so it’s worth repairing past problems by speaking to your lenders and working out new payment plans. While this might affect your overall score, it will give you a little bit of leeway and time to get back on track.
Be honest about your past
Believe it or not, banks know more about you than you might think. Thanks to data collected by credit reference agencies like Experian, Equifax and Callcredit, lenders will have access to your postcode, address, salary and family size, as well as electoral roll information, court records, fraud charges and previous dealings with companies. These are all used to predict your behaviour as a lender, so there’s no benefit in hiding your financial history. Being honest and open could even work in your favour and help you get the credit you require.
Check your credit score
If you’re in need of a new credit card or mobile phone contract, but have been rejected it’s essential to check your credit score. Agencies make mistakes, so look through your personal file and note down any discrepancies. If you do spot an error, ask it to be changed immediately before notifying other agencies of the mistake. There shouldn’t be a problem if your request is genuine, but be prepared to clearly state your case or to complain to the Ombudsman if necessary.
Think about when you apply
Every time you make a credit search a note will be left on your file. If you make too many applications within a short space of time your eligibility for additional funds could be affected. This might not seem fair, but even the smallest of details can make a difference, so learn more about your credit score and think carefully about your movements. You might not have realised before, but many of the financial decisions you make leave a footprint and these can be seen by others.
Credit and scoring systems can be hard to get your head round, but it’s worth clueing up so you can understand how lenders think!