Whether you plan to apply for a credit card, sign up for a mobile phone contract or rent a property – a bad credit history can stand in your way.
If bad credit is holding you back, there’s no need to worry. There are steps you can take to give your credit history the boost it needs.
Let’s take a look at the ways you can get it back into shape.
Why is it out of shape?
Before we take a look at what you can do to improve it, you need to look at the reasons why your credit history is not quite up to scratch.
It may surprise you to hear that even having no history of borrowing can go against you. This is because each time you apply for credit, lenders will look at your credit history to see whether you’ve been a responsible borrower in the past.
Put simply, your credit history is a list of all your borrowing activity over the last six years. Lenders access this through one or more of the three credit reference agencies – Experian, Equifax and Callcredit.
If lenders can’t see that you’ve kept on top of your payments in the past because you’ve never borrowed before, it’s likely that your application will be turned down. And if you’re accepted, you’re unlikely to be offered the best interest rates on the market.
But there are things you can do. For example, using a credit card could help you kick-start your credit history. Some lenders offer certain products, like credit builder cards, to those with a poor credit history. Ehen used responsibly, these cards can help slowly build or improve your credit history.
Although these cards typically come with a higher-than-average interest rate, once you’re established as a trustworthy borrower, you could shop around for a more competitive deal.
There are other ways you can improve your credit history and ultimately make yourself more attractive to lenders.
Update your information
Updating your address and signing up to the electoral register is perhaps the simplest way to get your credit history in shape. Lenders use this information to confirm your identify as part of their anti-fraud checks. If lenders struggle to find this information, it’s likely they’ll be put off lending to you.
So if you’ve recently moved house, make sure all your information is correct and up-to-date.
Fix any mistakes
Mistakes on your credit history can go against you. Negative marks like missed payments can influence a lender’s decision on whether or not to lend to you. This is why it’s vital to check it regularly.
If you spot a mistake, it’s important to get it fixed. Otherwise, it could prevent you from being accepted for credit.
Checking your credit history regularly can also help you avoid falling victim to financial fraud. For information on how to check it for free, head here.
Repay what you owe
It’s not always the case that lenders will inform you if you’ve been late with or missed a payment. This is why it’s vital to regularly check your credit history.
By keeping up with your repayments – whether that’s for your existing credit agreements or a mobile phone contract - you are showing that you can be relied on to repay what you owe.
Although missing payments doesn’t necessarily mean that you’ll be rejected for credit in the future, as each lender has their own criteria, lenders are likely to deem you as a risky borrower. This could mean that you’re accepted at a higher interest rate than you saw advertised.
Close your old accounts
Having a number of old accounts open and access to a lot of credit could hinder your application to borrow – even if you’re not using it. But, of course, whether or not you’ll be accepted will ultimately depend on the lender’s criteria.
If, for example, you do have a number of used credit cards, it might be worth paying off and closing these accounts. You can find out the best way of doing this in our previous blog.
Be wary of who you apply to
When it comes to applying for credit, spread out your applications. Each time you apply to borrow, your credit history will be marked. Applying to a number of lenders at once can give the impression that you’re desperate to borrow.
This shouldn’t stop you from weighing up your options and searching for a lender that offers the best deal for your needs, though. A soft search tool can help you check your eligibility for credit without it being visible to other lenders. You can find out more about this here.
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