A good credit rating will save you a fortune over your lifetime – giving you access to the best interest rates on everything from credit cards to mortgages.
Read on to find out everything you need to know to get the best possible credit rating.
Rule number one when it comes to improving your credit rating is to show lenders that you can handle any money you borrow. To do this you should get a credit card and use it responsibly – pay it back in full each month and don’t go beyond your credit limit.
If you haven’t borrowed money in the past, or have a poor credit history, then you’re likely to get turned down for mainstream credit cards. Instead you should apply for a credit building card. These are designed for those with patchy credit histories, past county court judgements or a history of missed payments.
Interest rates on this type of credit card are high to reflect the above-average risk to the lender. However, used correctly – which means borrowing regularly on the card and paying off the balance in full each month – they can help you build up a good credit score. Once you’ve done that you’ll be eligible for lower APR’s and more mainstream cards in the future.
Use our handy credit card comparison tool to find the best card for you. If you tap in a few details it will rank the credit cards most suited to your needs in order of how likely you are to be accepted, meaning you can apply with confidence. Failed credit applications are a big red flag to lenders. Using our tool will show you how to improve and protect your credit rating.
Lenders like to see that you can use credit responsibly. This means you should have a credit card and use it regularly and sensibly, always making at least the minimum repayment every month.
But if you’ve got old credit cards you don’t use, or high credit limits you don’t reach, getting rid of them will boost your credit rating. Lenders won’t want to lend to you if you already have credit you aren’t using.
However, don’t cut everything back to the bare bones. If cancelling all your credit would leave you very close to your limits you may appear desperate for more credit and close to losing control of your debt. Experts recommend never using more than 80% of the credit available to you.
To find a suitable credit card for your needs use our advanced credit matching technology.
Lenders are attracted to stability and there are a number of ways you can demonstrate this:
With interest rates hovering just above 0% it doesn’t make sense to have debts and savings. The best buy savings rates are only around 2%, whereas the average credit card rate is close to 20%, so your debts could be costing you ten times more than you are making on your savings. Stop losing money and use your savings to reduce your debt. This is key, as the less debt you have the more attractive you become to a lender as you look in control of your finances.
Make sure you pay everything on time. Unsurprisingly, late or missed payments will damage your credit rating – lenders want to be sure they will get their money back. Avoid any risk of accidental mistakes by setting up direct debits. These are the companies that report missed or late payments to the credit rating agencies:
If you hold joint credit cards, loans or bank accounts with someone with a bad credit rating it will affect your rating too.
Anything where you have joint access to credit will appear on both your credit records and so their financial behaviour good and bad from the past, present and future will have an effect on your credit rating.
Their financial behaviour from the past, present and future will effect your credit rating
Avoid the problem by breaking up with your partner. There’s no need to dump them in real life but severing your financial ties will mean one of you can maintain a good credit rating while the other works to improve theirs.
To financially dump your partner, cancel any joint credit cards or current accounts you have. Then contact the credit rating agencies (Experian, CallCredit and Equifax) and ask to be ‘financially disassociated’ from the person in question. Their credit history will then have no future effect on your ability to get credit.
What to Check
If you want to improve your credit rating you must regularly review your credit report. The good news is doing so shouldn’t cost you anything – by law the credit reference agencies have to let you see your credit record for no more than £2 – but by taking advantage of the free one-month trials offered by Experian and Equifax you can see your report without paying a penny. Or sign-up with Callcredit’s service Noddle for free-for-life access.
Simply sign up, access your report, then cancel your membership before the free trial ends. Make a note or set a reminder to be sure you don’t forget to cancel – if you forget you’ll be clobbered with a monthly subscription fee of £10 – £15.
With a couple of extra clicks you may even be able to earn money while you check your credit file. You simply need to apply for a free trial with a credit agency via a cashback website such as TopCashback or QuidCo. You’ll then be able to access your credit report for the length of the free trial and get paid by the cashback website.
Before you sign up for a free trial, check the terms and conditions for cancelling it to ensure you don’t get charged. Likewise, if you sign up via a cashback site, check if any terms apply for you to get the cash.
Once you’ve got your credit record go through the checklist on the right to make sure everything is in order. Credit agencies don’t share data so it is worth checking your report with the three main companies – Equifax, Experian and CallCredit – to make sure everything is in order with each of them.
The worst things to have on your credit record are missed payments or defaults. But there is no point pretending they aren’t there. If you have some, check whether they are accurate. If they’re not, speak to the lender involved and ask them to remove the mistake from your record.
If you have defaulted or missed payments in the past you can still sometimes get the black marks scrubbed:
Question the mark
Complain to the company involved. Tell it you think the record is unfair and lay out your reasons why. If the company refuses to remove it from your credit rating go to the Financial Ombudsman. If it rules that the black mark is unfair it will be taken off your record.
If there is a black mark because you owe a company money, talk to someone at the company, and see if you can organise a repayment plan to clear the debt. Once the debt is paid off, ask them to remove it from your record.
If the default or missed payment is entirely fair and doesn’t involve money owed then you can’t get it removed, but you can add a Notice of Correction explaining any mitigating circumstances to future lenders. For example, “I was in the process of a divorce and the debt was run up on a joint account by my now ex-partner”. Having a Notice of Correction on your credit report may well slow down credit applications – lenders will have to check it manually – but given that a default will usually stop you getting credit a slower process that may lead to an accepted application is a vast improvement.
Once you’ve got your credit record in shape, don’t damage it with multiple credit applications. It’s easy to fall into a vicious cycle where you apply for the best credit card, get rejected and just start working your way down the best buy tables. But the more credit rejections that appear on your record the less chance you have of getting accepted.
Our credit comparison tooleliminates the risk of applying and being rejected. Enter a few details about yourself and our advanced credit matching technology will rank credit cards, not only by their suitability for your needs, but also in order of the ones you’re most likely to be approved for down to those that might reject you.
Whilst acceptance still isn’t guaranteed, by applying for cards that we recommend, users are twice more likely to be accepted than those not using the tool.