“you should be looking out for any mistakes on your credit report, like a default showing when you know you made the payment, as this could cause problems when you’re trying to take out a loan...”
Check your credit history
Before you apply for credit it makes sense to check your credit history first. This is because all lenders will run a credit check on you as part of the loan application process and if they see that you’ve had problems with managing credit in the past, they could be more likely to turn you down or offer you a loan at a higher APR. Forewarned is forearmed so it makes sense to check what they will see before you apply.
You can get your credit history from one of the three credit reference agencies, Experian, Equifax or CallCredit. It costs £2 to get your statutory credit report from any of the credit reference agencies and you’ll then be able to see what information lenders can see about you when they run a credit check.
You should be looking out for any mistakes on your credit report, like a default showing when you know you made the payment, as this could cause problems when you’re trying to take out a loan. Contact the credit reference agency responsible and ask them to update your file – there are different rules on how to do this depending on the credit reference agency you’re dealing with.
Tips for improving your credit history:
- Make sure that you are on the Electoral Roll. You can register here.
- Set up a Direct Debit to make at least the minimum payment for any credit repayments you have to ensure that you don’t default.
- Make sure that you’re not financially linked to someone who has a poor credit history, such as a former partner. If you think that this might cause you problems then you can apply for a Notice of Disassociation.
- Make sure that your address is up-to-date on all your accounts.
- Don’t apply for lots of credit in a short period of time, as each application will appear on your credit history and could make you appear desperate for credit to lenders.
- Don’t withdraw cash on credit cards – not only is there usually a charge for doing this but lenders can see this as you having to rely on credit to pay for essentials and could be more likely to reject you.
- Cancel any cards that you don’t use anymore, as lenders might think you’ve got access to too much credit and turn you down for further borrowing.
- If your credit history is patchy, you might also want to consider taking out a bad credit loan*. This could help to rebuild your credit history and demonstrate to lenders that you’re able to borrow responsibly as long as you make your monthly repayments on time. Keep in mind that these types of loans often have higher interest rates than some other loans so make sure you’ll be able to afford the repayments before you apply.
*49.9% APR Representative
Meet the criteria
There are certain criteria that you’ll have to meet before you can get a loan. This varies from lender to lender, so check on their website before you go and talk to them. Most lenders are looking for the following requirements:
- You have to be aged over eighteen to get a loan.
- You should be a UK resident (some lenders will accept proof of address in the country).
- You should have a current account at a UK bank, and have your income (wages and benefits) paid into it. Some lenders also require that you have a current account with them but if you’re looking for a loan, that doesn’t mean you can only take it out with your bank – it is worth shopping around.
Lenders will also usually have their own individual criteria for a loan. This could be anything from a minimum income you’ll need to be earning to whether you’re up-to-date with all of your current credit repayments. You might not know what these criteria are, so it’s a good idea to use a loan eligibility checker before you apply. That way, you won’t have to apply for a loan to find out if you’d be accepted.
Still want to know more? Read part 2 of our guide here.