What’s new in your life? If things have changed since you last applied for credit, your eligibility might have improved.
We’ve taken a look at seven common signs you could be more likely to get that all-important ‘yes’ when you apply for credit.
1. You earn more money
Have you switched jobs? Or maybe you’ve bagged that pay rise you asked for?
Your income being higher could improve your likelihood of being approved for credit, assuming your expenditure hasn't changed. This is because having a higher income increases your affordability – in other words, it looks like you can afford to take on more debt.
How much you earn isn’t something that appears on your credit report, but it’s often something banks and credit lenders will ask you when you go on to apply for a loan or credit card.
2. Six years have passed
If you’ve got a negative mark or two on your credit report, they won’t stay there forever. Things like missed payments, IVAs and CCJs will be wiped from your report six years after they happened. Plus, even if it’s not quite been six years yet, being able to show you’ve built good borrowing habits in the more recent past can help lenders see that the negative events in your past don’t reflect the type of borrower you are today.
3. You’ve paid off some debts
Have you paid off a big chunk of debt on a loan or credit card? This is a good thing when it comes to credit scores, as it reduces the overall amount you owe. If you’ve paid off a credit card, it can help reduce your credit utilisation, too.
In plain English, reducing your credit utilisation means that you’re using less of your available credit. Lenders like to see this because it shows you’re not totally depending on credit to get by every month, making you seem like a responsible and trustworthy candidate to lend to.
4. You’ve closed an old account
Similarly, closing down an old credit account can work in your favour too. This could reduce your total credit limit if that account was for a credit card, which could push your credit utilisation up. But, having less available credit on credit cards means you’re less able to go on a big spending spree and rack up lots of debt in one go. This is reassuring to lenders, who may worry that if you have large amounts of credit available to you now, if you used all of that plus what they lent to you, you may not be able to afford to pay everything back.
This works well for old accounts that you rarely or never use. If you have an account that you use regularly, it makes sense to keep this open.
5. You’ve built a longer history
When you last applied for credit, how long had you been borrowing for? If you were relatively new to borrowing (for example, if you had a thin credit history), you might have been rejected because the lender you chose couldn’t see a long enough history of making payments on time.
If you’ve since taken some other steps to build your credit history and it’s been a good few months, you could have a better chance of being approved.
6. You’ve cut ties with old connections
Did you share a mortgage or a joint loan with someone, once upon a time? If you’ve now gone your separate ways and that account is closed, you can get rid of them on your credit report too.
Once the account has been fully closed down (not just repaid in full), you can contact credit reference agencies and ask them to remove your old financial connection from your report.
If their credit file leaves a bit to be desired, for example if they’ve missed payments or borrowed right up to their credit limits, having their name removed from your report could help put lenders’ minds at ease. It shows that you won’t have to put your own finances at risk to cover any of their bills or expenses.
7. You signed up to vote
If you’ve voted in any recent elections, your name will be on the electoral roll. This is really important when it comes to your credit report, as it helps lenders verify your identity and address.
Even if you’d rather not vote, it’s still a good idea (and a legal requirement) to register to vote if you’re eligible to in the UK. This is because it can really help your application get off the ground. It only takes minutes to enrol online, and the information will appear in your credit report within a couple of months.
How can I check if my eligibility has improved?
The clearest sign your eligibility has improved is seeing your credit score increase. Your credit score is a great tool to help you understand how likely – or unlikely – you are to be approved for credit. All of the things we’ve explained here can have an effect on your credit score. A better credit score can mean a better chance of being accepted, as well as being able to borrow at lower interest rates and potentially qualify for extra perks like rewards or cashback on your borrowing. Check your score regularly with each of the three credit reference agencies to see if your eligibility is improving!
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