Need a mortgage, credit card, insurance, energy or mobile contract? Since the crunch, credit worthiness has become a huge factor dictating acceptability AND rate. Yet it’s a myth everyone has a credit rating. Each lender has its own bespoke, unpublished scoring system to assess if you’re a profitable customer (it’s not just about risk). So even those with decent credit histories can be rejected.
- Boosting your credit score’s like going on the pull.
As each lender’s different, there’s no fixed route to credit attractiveness. Instead, it’s about using a series of tricks to make you more fanciable.These include…
a) Time applications. Too many in a short space of time looks desperate.
b) Stability’s good. Put your landline, not your mobile, on applications.
c) Prioritise. Get key ones first, eg, a mortgage before a mobile contract.
d) Get on the electoral roll. If you’re not, getting credit’s tough.
e) Issues wipe after six years. If you’ve past problems and are close, wait.
- Get paid to check your credit file.
Errors can kibosh applications. So check files annually and before big applications. Worse, get rejected then keep applying without checking and even if the error’s fixed, lots of applications become a problem.You’ve a legal right to see your file for £2 at Equifax, Experian or Callcredit.
- Earn £100 cashback and (re)build your credit score.
Cashback credit cards pay you to spend on them. They are aimed at poorer credit scorers, so even some with CCJs/defaults (if over a year old) can get it.Plus as credit scoring is about using past behaviour to predict the future, a key to (re)building credit worthiness is to behave well by getting a credit card and never missing a repayment. Aqua’s perfect for this, though it’s a horrid 34.9% rep APR. Ensure you FULLY repay each month by direct debit to avoid interest (and never withdraw cash).
- Credit (re)build cards for serious past issues.
If you can’t get Aqua, Capital One’s Classic* accepts some with recent CCJs and defaults, or made bankrupt over 12 mths ago. Use it for a small amount each month and FULLY repay, as it’s a nasty 34.9% rep APR. After 6-18mths, your score should’ve improved.Otherwise, the ‘if all else fails’ options require you to shell out, so it’s touch & go if it’s worth it. Capital One’s Secured Card* needs a £49 or £200 deposit for a £200 credit limit. It’s 34.9% rep APR, so always FULLY repay. Once your credit’s improved, close the card, and your deposit’s returned.Or pay the Cashplus Creditbuilder* prepaid card monthly (total £65/yr) and it reports payments to credit reference agents. After a year, it counts as a fully paid loan agreement. Full help in Rebuild Credit Cards and Official APR Rates.
- Marriage doesn’t hurt, but joint finances do.
If people are credit-linked, one person’s file can affect the other’s application. This ain’t about marriage, co-habiting or holding hands. Linkage comes from having a joint mortgage or bank account, but not credit cards as they’re ‘2nd cardholders’.So avoid joint products if you’re in a relationship with someone who has credit issues. If you separate from a partner and are no longer linked, write to the credit reference agencies and ask for a ‘notice of disassociation’.
- Don’t shell out to find your ‘credit score’.
I often hear “my credit score’s 900 but I got rejected”. Yet ‘scores’ flogged by credit agencies are only lightly indicative. In reality, each lender scores you based on its own secret, unpublished algorithm assessing not just your file, but any past dealings with you as well as your application form. So buying a score just based on your files is not that relevant. If you get it free, great – but I wouldn’t pay for it.
- Shift debts with low-cost or even free.
Cutting existing debt costs means repayments clear more actual debt, instead of just covering interest – helping your score. Yet again we’ve another new top balance transfer (debt-shifting), new cardholder best buy, though it needs a decent score.
a) Repay at least the minimum each month, or you can lose the special deal.
b) Spending isn’t usually at a cheap rate, so avoid it.
c) You’ll usually need to shift the balance within 2mths to get the rate.
- Repay by direct debit, even if the amount varies.
To protect your credit score, never miss repayments on anything – it hurts your score. With cards, if you can’t fully repay, for safety set up a direct debit to cover the monthly min, then manually repay more on top.
- Small address errors can mean big problems.
When checking through your credit file, ensure all active accounts and bills are for your current address (or close them). I once heard of an old non-cancelled mobile bill listed at the wrong address scuppering a lady’s mortgage application.
- Close unused credit cards, unless…
Too much available credit adds to the risk and lenders don’t like it, so cancel unused cards. Yet if you’ve other card debts, first call and ask if it’ll let you shift debts to it cheaply – protecting your score by avoiding new applications.
Note: This is an article extracted from http://www.moneysavingexpert.com/latesttip.