Should you detox your credit history?

Should you detox your credit history?

author: Dan Griffiths

By Dan Griffiths

How often do you check your credit history? Do you think it could do with a bit of a “detox”?

Well if you do, you’re not alone, as recent research suggests that one in five Brits doubt they would pass an application for a credit card, loan or mortgage without cleaning up their credit history first.

The research, carried out by AA Financial Services, also found that 60% of people in the UK say they would embark on a “credit detox” before making an application for credit.

Getting your finances in order

On average, these credit “detoxers” start neatening up their credit history around six months before making an application for credit, with the younger generation (18-34-year-olds) the most likely to cleanse their finances before applying for credit.

It’s a great idea to give your credit history a detox, but it shouldn’t be something that you only turn your attention to when you’re thinking of applying for credit. Maintaining a responsible history of borrowing is key to accessing the cheapest interest rates on credit cards, loans and mortgages, so it really does pay to keep on top of it and check regularly.

Whether or not you’re planning to apply for credit, your priority should be making your repayments on time every month. If you miss a scheduled payment, it will be marked on your credit history and future lenders will be able to see it and may base their decision on it. A good way to make sure you don’t miss any payments is to set up a Direct Debit to make the payment for you – you can set one up to clear your entire balance on a credit card too. For more information on improving your credit history, head here.

Worryingly, in a separate study by credit checking service ClearScore, it’s suggested that over one million young adults in the UK are choosing to skip some monthly repayments, despite nearly a third of 18 to 34-year-olds saying they have been rejected for a credit application because of a missed payment.

Keeping on top of things

Even if you have missed a payment in the past, or you’re not planning to apply for any credit in the near future, it’s important to try and keep on top of things. Ideally, you should aim to check your credit history every month. This way you’ll be alert of any changes and be able to spot any potential mistakes that crop up. Plus, it lets you see if your credit history is improving as each month passes – if there’s a negative mark against you, you can identify it and figure out where you went wrong.

Further research by ClearScore late last year found that one in three people overestimate their credit history, thinking they have a better track record than they actually do. This further highlights how important it is to check your credit history regularly, as there may come a time when you need a mortgage and struggle to find a lender!

Unfortunately, the AA Financial Services study also found that nearly half (45%) of “detoxers” return to their bad habits after they’ve been approved for credit. Although it may be easy to slip back into old spending routines, your credit history is really important and will affect your chances of being accepted for credit in the future. Not only this, but improving your credit history also means you’ll have access to better deals on credit cards, loans and mortgages – which means borrowing will be cheaper for you.

You can keep an eye on your credit history by checking with one of the three credit reference agencies; Experian, Equifax or CallCredit. Alternatively, you can sign up for free services ClearScore or Noddle

Disclaimer: All information and links are correct at the time of publishing.

author: Dan Griffiths

By Dan Griffiths

Should you detox your credit history? Should you detox your credit history?