Is your purse bursting with store cards that you never use? Have you just never got around to putting yourself on the electoral register?
It is not just missing a mortgage repayment or faulting on your loan that can have a negative effect on your credit rating. Simple things can matter too.
But why does my credit rating really matter, I hear you cry? After all we never actually see this complex piece of information do we?
Quick Move Now took a look into credit ratings and found they are not just a jumble of figures that float in the ether somewhere. If you ever want to get a mortgage, take out a mobile phone contract or apply for a credit card to pay for your summer holiday, your lender will have to carry out a credit check on you.
And it doesn’t just determine whether or not they actually give you the money; it can also have an impact on the rate of interest you will be offered.
Just because your credit rating is currently bad, does not mean it is all doom and gloom for your foreseeable future though.
There are three main credit reference agencies in the UK and you can get a copy of your credit report for just £2 from any of them. They are Experian, Equifax and CallCredit.
Once you know how bad it is, there are plenty of things you can do to improve your credit rating. But you need to get cracking now if you want to be able to apply for a mortgage any time soon.
So what really has an impact on your credit rating?
- Existing debts and late payments
- County Court Judgements
- Applying for a lot of credit at the same time
- Having credit cards and store cards that you no longer use
- Mistakes on your credit report
- Not being on the electoral register
- Moving house a lot
- Being tied into joint credit with someone who has a bad credit rating
And what can you actually do to improve it?
- Stop applying for credit until your score has improved. Ask lenders to carry out a ‘quotation search’ not a credit application if you are just comparing rates
- Get on the electoral role
- Inform the credit reference agencies, or in some cases the initial lenders, if there are errors on your report
- Cancel all unused credit cards, store cards and credit agreements
- Include the information lenders want to see on any application – they prefer landline phone numbers to mobiles and want to see a long term employment history, address and bank account history
- Pay back credit. This may mean taking out a credit card and using it to buy small items, which you pay back immediately. You will need to do this for around six months for it to have any impact
All lenders have different criteria for offering credit; there isn’t such a thing as a credit blacklist as we are all led to believe. So just because one company has turned you down doesn’t mean all is lost.
In the long term, however, the main priority must be to ensure you keep up repayments on any loans you have. If you do this, along with all the other tips above, your credit rating will soon begin to improve and that new home won’t be out of your reach for ever.