Are you thinking about applying for credit? If so, you need to make sure your credit score is in check. Lenders will rate your credit profile to see if you're a suitable candidate before you'll be accepted for that loan, credit card or mortgage, and having no credit history at all can be just as detrimental as having a less-than-perfect one. But, there are ways you can improve your credit score to boost your chances of being approved…
- Make sure you're registered at your current address. A lot of lenders use the electoral roll for identity verification in order to combat identity fraud, so if you're not registered to vote at your current address, it's highly likely that you'll be automatically rejected. So, make sure you're registered with the electoral roll at the correct address before you even think about applying for credit.
- Build up a credit history. Lenders will look at your previous credit information to decide if you're a suitable candidate, and your history becomes even more important if you're making a particularly hefty request (such as applying for a mortgage). But, if you've never had a credit card, loan or overdraft you won't have a credit history, and that could pose difficulties – how will lenders know whether or not you're a credit risk if they can't evaluate your past performance? That means, if you want to secure that credit agreement, it's worth establishing a positive credit history by taking out a credit or store card first. Doing so can prove your money management skills and can be a great way to build up your score, but of course, you'll need to pay off the balance on that card in full each month.
- Keep balances as low as possible. Try not to have credit card balances that are more than 30% of your limit – doing so could be an indication to lenders that you already use too much credit and may not be able to keep up with additional repayments, which could lead to your application being rejected. As a general rule of thumb, keep balances as low as possible, while still using a bit of your limit to prove your credit-worthiness.
- Close any account that isn't needed. Lenders are paying increasingly close attention to the amount of credit available to an individual, and if it seems you've already got access to a lot, they might be reluctant to offer you any more. That means any accounts you don't use or need should be closed as soon as possible by, for example, cancelling a credit card that you've paid off and will no longer be using.
- Stop applying! If you've been refused credit by a lender, don't keep applying elsewhere. Each credit search will leave a "footprint" on your file and too many in a short space of time could indicate that you're financially over-stretching yourself (or, perhaps, that you're desperate for money and could be a credit risk), and that means they may not approve your application.
- Keep on top of your credit score. It's a good idea to regularly check your credit score to make sure everything is as it should be, particularly if you're thinking of applying for a mortgage (or other large credit agreement) in the near-future, and if it isn't as peachy as hoped you'll know the areas you should focus on to improve it. It'll also highlight any discrepancies, and if you don't agree with anything on your file, contact the credit reference agency. If you've been refused credit you should get a copy of your credit report to check it over, and if you don't agree with anything (such as CCJ settlements not being recorded, or even fraudulent activity), make sure to contact the agency to put things right – updating your file with the correct information could help ensure you won't be refused credit in the future.
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