Everybody should make the effort to check their credit rating frequently, since it can influence whether you qualify for a credit card, mortgage, secured loan and so on. You can check your credit rating for nothing. If you find your credit rating isn’t good, there are steps you can take to improve it. Scroll down and find out how to improve your credit rating today!
WHAT IS A CREDIT RATING?
A credit rating is a numerical value that represents your level of creditworthiness. When you apply for a loan or mortgage, lenders want to make sure they can depend on you to keep up with repayments. They will do this by looking at your credit file, which notes everything about your credit history.
Your credit file is used by the lender to decide if they should lend to you, how much you can borrow and how much to charge you on interest.
The latest information on your credit file is crucial, as the lender will want to know your current financial position.
If your report shows any signs of late or missed payments, your lender may charge you higher interest rates. There’s a good chance your lender might reject your application altogether. Lenders need to know they can trust you to make repayments. If you’ve missed previous payments, the lender may feel they’re taking a higher risk by lending to you.
We advise that you always keep up with your repayments. Missing payments can cause nasty consequences, such as being rejected for a mortgage or credit card, so always pay on time.
WHAT DOES YOUR CREDIT REPORT INCLUDE?
We’ve already mentioned a few details your credit report holds such as missed or late payments, but there’s more. The information on your credit report depends on the agency, as each will have more or less information about you. Your report will normally include:
- Name, date of birth and address
- Late or missed payments
- If you’re registered on the electoral roll
- Any debt you owe to lenders
- Previous credit applications
- Financial links for e.g. a joint mortgage or bank account
- If you’ve entered into an IVA or been declared bankrupt
However, your report won’t include:
- Your income
- Council tax arrears
- Student loans
- Medical history
- Fines on driving or parking
Your lender may ask for this information when you’re applying for a loan, but the information won’t be included in your report.
WHAT’S A GOOD CREDIT RATING?
A good credit rating is never set, as all lenders have their own preferences. Ensure you have a good credit score with your agency, as you’ll more likely have a good credit rating with your lender.
The main agencies in the UK are Experian and Equifax, which together cover the majority of UK lenders. A credit score above 420 is considered good by Equifax, and a score above 670 is considered good by Experian.
Keep in mind, lenders don’t just look at your credit rating when deciding to lend to you. There are other aspects involved.
CAN YOU CHECK YOUR CREDIT RATING?
Of course!
We’ve already mentioned the UK’s main credit agencies: Experian and Equifax.
These agencies tend to charge people to check their credit rating, but there are other agencies that allow you to check for free such as ClearScore, Noddle and MSE. If you decide to check your credit rating through these sites, they’ll normally offer you loan deals as this is mostly the reason why they run for free.
Make sure to shop around if you want to borrow a loan, as different lenders offer competitive rates. If you’re looking to borrow money, our qualified advisors can offer you free advice on what borrowing options are available to you.
WHY DO YOU NEED A GOOD CREDIT RATING?
Are you someone who wants to buy and own their home?
If you have a bad credit rating, your dream of owning a home will less likely come true. You need to have a good credit rating if you want to buy a home, get a credit card, mobile contract and so on.
Having a good credit rating will benefit you greatly throughout the years. If you currently have a poor credit rating, you should start finding ways to improve it.
WHAT LOWERS YOUR CREDIT RATING?
There are various reasons why your credit rating may lower, such as:
Late/Missed Payments
Not paying your bills on time can have a negative impact on your credit rating, as it shows the lender you can’t be relied on to make payments on time. Same goes with missing payments. If you miss multiple payments, the lender will feel less inclined to lend to you.
Studies show that your credit rating can lower by 160 points if you miss payments, so always pay your bills on time!
Not Registered to Vote
Not being on the electoral register can lower your credit rating. This may seem odd, but lenders check to see that you appear on the list to make sure you are who you say you are. Lenders will get suspicious if your name doesn’t appear on the list, as they’ll believe your application for your new credit card or mortgage may be fraudulent.
Being on the electoral register can boost your credit rating by 50 points.
Remember: you don’t have to vote once you’ve been registered. Voting doesn’t affect your credit rating, not being registered does.
Linked Credit Reports
If you have a joint current account or joint mortgage with a partner, friend or family member, this can affect your credit rating. This will only happen if the person your credit report is linked with has a poor credit rating.
If you’re with your partner, help them to improve their credit rating. However, if it’s an ex-partner, you will need to get a dissociation to rid the link.
File Mistakes
Mistakes on your credit file can have a negative impact on your credit rating. It may seem unfair, but if your address has a spelling error,it can bring your credit rating down. Be sure to check your credit file for any mistakes. If you find errors, correct them as soon as possible.
Existing Debt
Financial experts advise not to apply for credit if you’re currently in debt. Banks and other lending societies will be cautious about lending to you if you’re already in debt. If they decide to lend to you, you’re just adding more debt onto your plate.
Fraudulent Activity
If something on your credit report seems unusual, for e.g. you have applied for credit but don’t remember doing so, contact your credit agency immediately. This may be a fraudulent act this is not only lowering your credit rating, but costing you money.
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WHAT YOU CAN DO!
If you’re suffering from debt, get in touch with us on 0330 041 2299 and get free debt advice from our qualified advisors.
