Checking your credit report is an essential part of maintaining your finances. It allows you to pick up on any mistakes or even fraudulent applications that could affect your chances of getting credit.
Your UK credit rating score is calculated by assessing your credit report based on information sourced from credit bureaus. So, there’s no such thing as a universal credit score. Each lender has its own system in place to decide whether or not to accept you as a customer, meaning you could be turned down by one, but successful with another. To give you a better idea of how your application might be viewed by lenders, credit reference agencies produce their own version of your UK credit rating. The higher this number, the higher your chances of getting the best credit deals, but a good score from a credit reference agency is no guarantee that your application will be successful.
‘UK credit rating’ scores are not limited to banks. Other organizations like; insurance companies, mobile phone companies, landlords, government sectors, and online lenders use the same methods to identify the credit-worthiness of a potential applicant.
How to Check Your UK Credit Rating?
Before trying to improve your UK credit rating, it’s important to read about the different credit reference agencies, what data they review, and what they deem as a good or a bad credit score. It’s also important to check your latest credit score before acting towards improving it.
Firstly, make sure that all the information on your report is accurate, and get it corrected by contacting the lender or credit reference agency if needed.
Online tools such as ‘TotallyMoney’ can provide you with a credit score and report for free. You can use them to track your finances and find lenders which are most likely to accept you for credit.
Methods to Increase your UK Credit Rating
1. Create Credit History with Credit Cards
If you’ve never applied for credit before it’s difficult for a lender to evaluate you. Consider taking out a credit building credit card and make a couple of purchases on it each month. Then repaying the balance in full at the end of the term with a direct debit is a good method to build a good credit history. This will show the lender that you can responsibly manage credit.
2. Space Out the Frequency of Your Credit Applications
Credit reference agencies are not informed about rejected applications for credit, however, a note is made every time a credit search is done by a lender. Don’t use a scattered approach when applying for credit. The more credit searches that are carried out in a short time, the less likely you are to be accepted for credit. Space out credit applications and try to find out whether you are likely to be accepted before applying. Applying for credit only when you really need it is a good practice as this ensures that the intervals between your loan applications are well spaced out.
3. Cancel Unused Credit Cards
Lenders may look at the amount of credit you have access to, as well as the amount of debt you owe. Close all the credit accounts such as credit cards, store cards, mobile contracts and accounts that you don’t use or need anymore. Chopping up the cards is not enough going to cancel your account. You need to physically contact the respective provider and close the account. They will try and convince you otherwise, because they don’t want you to leave, so be prepared for that and close your account. Another important point to remember is that if you leave your account unused for a long time, you could incur fees on that account.
4. Never Miss or Delay Payments
The instances of missed and late payments can remain on your credit file for up to 6 years. If you have made a late payment due to circumstances that were beyond your control, as long as you made that payment promptly, you can talk to your credit provider and try getting the black mark removed. This also applies to late payments and for utility bills like gas or electricity.
5. Paying Off Your Debts
Paying off more than the required minimum payment signifies good credit management to a potential lender. In order to manage your debt well, ensure that you’re making headway into repaying what you have borrowed.
6. Seperate Yourself from Financial Linkage
If you have a joint mortgage or a joint bank account, you become “financially linked” with the person you have taken it out with. So, if they have a bad UK credit rating, it could impact yours. If you have already split up with your partner, husband, or wife, and the joint financial product that you have taken out is no longer between you both, inform the credit reference agencies the disassociation. Not doing so means the other person’s financial affairs could still have an impact on your credit rating.
7. Register on the Electoral Roll
Registering yourself on the electoral roll or register will improve your chance of being accepted for credit. This is because UK lenders and credit reference agencies use this to check if you are who you say you are, and if you live where you say you live. Make sure your credit record reflects the correct address details. Living at the same address, being employed in the same job and having the same bank account for a reasonably long period will also help.
8. Use a Prepaid Card to Fix Your Credit
Credit builder prepaid cards can help you improve your UK credit rating. They charge a monthly fee of about £5 which is registered in the form of a small loan which you’ll have to keep paying for 12 months, and at the end of the term, an entry will be added in your credit file stating that you have successfully repaid the debt. A prepaid card does not require a credit reference as you don’t borrow or top up funds on it.
If you implement these basic financial practices, your UK credit rating will increase in no time, making your more financially secure and eligible for loans in the future.
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