Having a poor credit history can close many doors in terms of getting the best deals on credit cards, mortgages and loans. It can be really disheartening being rejected for credit, but if you find yourself being rejected, stop!
If you’ve been rejected for any form of credit, alarm bells should be ringing, and you need to stop and analyse the situation before applying again with a different lender. A good place to start is by checking your credit history using one or more of the three main agencies, Experian, Equifax or Callcredit’s free service Noddle. Lenders use information from your credit history, combined with information gathered from your application form, to create your credit score and this is what they use when they decide whether to approve or reject your application.
If you do check your credit history and find that it’s not great you may feel deflated but it’s not the end of the world. There may be errors you could get corrected and you can still attempt to rebuild your credit history, however bad it is currently. In this blog we hope to guide you on how you can make a start on improving it in just three months.
Don’t get carried away
Usually when a lender checks your credit history a footprint is left on your file. The more applications you make for credit, the more footprints could be left. Lenders are able to see these footprints and may jump to the conclusion that you’re desperate to borrow money – and this could drastically reduce your chances of being accepted. If you can, try to space out applications, for instance if you’re going to be applying for a mortgage in six months time you might want to hold off applying for a credit card until afterwards.
If you’ve just been rejected then you need to hold off and plan your next move carefully.
Cancel unused credit cards
The next step you could take is to cancel any credit cards you don’t use anymore. If you’ve got numerous unused credit cards, this might affect whether or not a lender will accept your application. Your lender will want to know that you’ll be able to pay them back, and the more credit cards you have – used or not – the more money you’ll have access to, which could mean they become the lowest priority when you’re repaying.
Creditors also don’t want to see that you’ve maxed out your credit cards, so there are some rare cases where keeping one rarely-used credit card may work in your favour. You may find keeping your old one and using it rarely and paying it off in full each month – rather than spending nearly the full limit on your main credit card – helps you in the future.
Sign up to the electoral roll
If you’re not already, you should make sure you sign up to the electoral roll. This helps lenders to identify that you are who you say you are and that you live where your application says you do. Not being on the electoral register will make it much more difficult to get any type of credit.
In some cases, you may not be allowed to vote. If you’re in this situation, you may wish to contact the three Credit reference agencies with a Notice of Correction stating the reason why you cannot vote. Each of the three agencies will have details on how you can do this on their websites. However, there’s no guarantee this means lenders will accept your application. Ultimately it is up to the individual lender whether they take it into consideration.
Take action on any mistakes
If when checking your credit report you notice there are mistakes, such as defaults that have been listed by a lender you have never dealt with for example, you must get these fixed as quickly as possible. To do so, you should contact the creditor in question. Most lenders have procedures in place for mistakes, and if you can provide proof, you should be able to clear things up within 28 days.
Should you not come to a resolution with the creditor, you should get in touch with the credit reference agency that the mistake appears on, and they should conduct an investigation to get to the bottom of it.
Credit cards for bad credit
Some lenders offer credit cards especially suited to those with poor credit histories, and used correctly, they could help you to rebuild your credit score. The best way to improve your credit rating is to prove you can borrow responsibly.
If you decide to take out a credit-builder card then you must remember that being late or not making at least the minimum repayment will further damage your credit rating. You should always aim to repay the full amount each month, as this will gradually improve your credit rating and stop you from paying any interest on purchases. If you can’t make the full payment, you should pay as much as possible – this way you won’t have to pay as much interest.