"My credit rating is already ruined"
If you have a history of missed loan repayments, late credit card payments or have defaulted on your mortgage, you may have done some serious damage to your credit record. If this is the case, there’s no excuse for not trying to improve things for the future – after all, it’s in your finances' best interests to qualify for lower interest rates when borrowing money. With some careful planning and sensible decisions, you can improve your credit rating and eventually escape the sub-prime market. Here’s a quick guide.
Get your credit record sorted
If you have been refused credit, and believe that the problem is with your credit record, the first course of action is to obtain a copy of your credit file and check it for mistakes. This is available for a fee of around £2 from one of the UK’s credit reporting agencies (Experian, or Equifax), and will show you any factors that may be affecting your ability to obtain credit, such as missed or late payments, defaults or CCJs. If there are any inaccurate entries, apply to the relevant parties to have your file corrected. Or, if there was a serious reason for your past difficulties with credit that have now been resolved, apply to have a note of explanation added to your file, which may help with future applications. See our article Your Credit Score and You for more information on how to deal with your credit record.
Credit cards as credit repair
Past bad credit entries remain on your credit file for six years – after that, the slate is wiped clean. If you begin using a credit card correctly over the course of the next few years, you can gradually improve your credit rating over time. This is because banks report on your credit card usage to the credit reporting agencies, and if your report begins to reflect a healthier relationship with credit, more lenders may be willing to advance credit in the future. You may have to begin with a credit card provider that specializes in bad credit applicants, which means higher interest rates, but after a period of using your card correctly and repaying the balance on time each month, you may be able to apply for more attractive terms and affordable interest rates with more mainstream lenders. Find a credit card with the TotallyMoney online credit card comparison tool.
Credit repair mortgages
If you have a damaged credit rating and are looking for a mortgage, you may find that high street lenders are not willing to lend to you, and the higher interest rates offered by sub-prime mortgage lending specialists make it impossible for you to borrow affordably. Many mortgage hunters with damaged credit records find that they have no other option than to borrow at inflated rates that are beyond their means, further compounding the problem if they fail to keep up with the repayments. However, the increase of credit repair mortgages in the UK is helping many consumers repair their credit rating and borrow affordably at the same time. Mainstream lenders are beginning to offer mortgages on a stepped interest rate basis; interest rates are gradually lowered over time as repayments are kept up to date, allowing you to slowly escape the sub-prime mortgage market. Speak to an independent advisor regarding your credit repair mortgage options.
Need a loan? Go secured
If you are looking for a loan, and have a history of bad credit, many lenders may offer such high interest rates that the total loan cost is pushed beyond your budget. The best way to avoid paying inflated interest rates is to opt for a secured loan. This way, the loan is secured against a valuable asset, such as your home, which usually allows the banks to offer lower interest rates in return. However, this means that you could lose your home if you are unable to complete on the loan, so always make your repayments on time and in full each month. Get a free, no-obligation secured loan quote.
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