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Start Improving Your Credit Card Rating Today

By: Garry Crystal - Updated: 7 Aug 2013 | comments*Discuss
Credit Rating Credit Cards Lenders

Having a poor credit rating can lead to many years without loans, credit cards, store cards and even normal bank accounts. Taking the required steps to improve a credit card rating is a priority for those who wish to avoid the high interest lenders.

Why Do I Have a Poor Credit Rating?

One of the most obvious answers to this question is defaulting on loans or other credit agreements. But this isn’t the only reason customers have poor credit ratings. Credit scores are calculated by lenders and each will have their own lending criteria. For some lenders the fact that applicants are not on the electoral role will be enough to refuse credit. All lenders are different when it comes to calculating credit scores. But there are ways to improve credit ratings that will make applicants more favourable to lenders.

What is a Credit Reference?

Credit references or credit files are held by three credit agencies in the UK. The information held in the credit files will give lenders an overview of the applicant’s credit and debt history. Included in credit files will be name, date of birth and past and present addresses, these are used to verify applicant identity. Financial information will include County Court Judgements, default notices, unpaid debts and missed and late payments.

Does a Bad Credit File Mean No Chance of Credit?

Not always, the credit file will be used as a guide but is not the ultimate deciding factor. Lenders do place profits above all else and if they feel that an applicant can make them a profit they may provide credit. Customer risk is also a factor and if the customer does look like a risky credit proposition the lender may simply reject the application. Having a good credit rating means fulfilling the lender’s criteria for providing credit.

How Can I Improve My Chance of Obtaining Credit?

The first step will be obtaining a personal credit file from one of the three UK credit reference agencies. Applicants can usually obtain a free trial copy online for 30 days or can pay £2.00 to have a copy posted. Applicants should then check reports for errors. If there are errors it is the customer’s right to have these corrected by contacting the company who placed the notice. Customers can also place their own notes on credit files for lenders to view.

Should I Check My Credit File Regularly?

Credit files should be checked at least on an annual basis. This will help to highlight any errors, and regular checking is a good way to spot credit fraud. Always check credit files before applying for any type of credit. A credit reference will give an idea as to whether or not a credit application will be successful. Look out for factors such as old mobile phone contracts that were paid in full but not cancelled, especially if contracts were at previous addresses.

How Can I Improve My Credit Rating?

One of the major ways to improve a credit rating is to ensure that electoral details are present and up to date. Any applicant who is not included on the electoral role is unlikely to be approved for credit. Some lenders will still approve but it is likely they will ask for actual proof of address such as a recent utility bill. Registering on the electoral role is simple to do and forms can be completed online and posted to local authorities.

Should I Apply For Credit to Boost Credit Ratings?

People who have poor credit ratings or no previous credit at all will find it very difficult to obtain credit with low interest rates. There are credit cards designed specifically to help people rebuild their credit rating. Interest rates on this type of credit card will be high but there is the option to pay balances before the interest period kicks in. Obtaining one of these credit cards and maintaining a good repayment record will help to rebuild credit records.

Should I Just Apply for Numerous Credit Cards and Wait?

People with poor credit records should never apply to different credit companies all at the same type. Credit card applications leave ‘footprints’ on credit files and lenders can see this. Apply for one only and see if the application is rejected or approved. Multiple or repeated credit applications will look like the applicant is desperate for credit. This will not look like a good credit bet to lenders.

What Other Ways Can I Improve My Credit Rating?

Applying for ‘pay monthly’ mobile contracts can be a way to improve credit ratings. The most important factor in rebuilding a credit rating is to maintain payment; do not miss or make even one late monthly payment. Credit approval is never guaranteed but following these steps should help to rebuild a credit rating for future applications.

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