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Can you improve your credit rating?

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Are you wondering ‘can you improve your credit rating?’ Your credit score can affect your ability to successfully apply for finance products or benefit from preferential rates. However, do you know exactly how it’s calculated or the best ways of improving it?

What’s a credit score?

Your credit rating is used by lenders to determine how risky a customer you might be. They look at your current financial commitments and your past repayment history, as well as checking your identity and address details. Your score is based on a number of criteria, which are different for each lender.

Checking your credit rating

If you’ve never checked your credit rating before, then it’s definitely worthwhile doing so. It’s a good idea to do this on a regular basis and especially before you apply for a large amount of credit, such asa mortgage. By looking at your credit file, you can see what potential lenders will have access to and consider the likelihood of your application being successful. Credit reference agencies will charge a small fee for viewing this or may offer free trial periods. Make sure that you check it carefully for any errors, such as the wrong address or an old card still showing as active, as these could negatively affect your rating.

How to improve your credit rating?can you improve your credit rating?

If you find that you have a low credit score, then it’s not the end of the world. There are ways in which you can rebuild it. Lenders need to verify your address details, so it’s vital that they all match. It’s essential that you’re on the electoral role, as this will confirm your current address. When you check your credit file, look for any old or unused cards and make sure they’re all registered to your current address. Using different properties could make a lender suspicious and wary of providing additional funds.

Use it wisely

By using credit in the correct way you can start to rebuild your rating. Even having no previous credit history can make you a risky customer. Therefore, it’s a good idea to have a credit card with a low limit and use it regularly. Ensure that you make the repayments on time every month and this will start to build a positive rating. Even one missed payment can have a negative impact. If you’re in financial difficulties, then it’s worth speaking to your lender first rather than defaulting.Don’t get into the spiral of applying for more credit if you’ve already been rejected. If you’ve got too
many applications close together, lenders might think you’re desperate for the money. Try to spread them out and check your file to ensure there’s no mistakes.

Stability

A stable customer is less of a risk to lenders, so keep your personal information as settled as possible. Changing homes, jobs and banks regularly could make you seem a less suitable customer and mean your applications are rejected. Lenders tend to look more favourably on home owners over renters and those who are employed, rather than self-employed.

You also need to consider any joint financial commitments you have and whether they’re impacting on your credit score. If the person you hold a mortgage, loan or current account with has a low credit rating, then it could have an adverse affect on yours. If this is the case, then completely separate yourself financially from them.

Your credit rating is important even for products such as insurance and mobile phone contracts. Therefore, it’s worthwhile keeping an eye on your score and trying to rebuild a poor one.

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About Catherine Stern

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About Catherine Stern

Catherine Stern is a freelance writer with a background in marketing and PR. She currently writes web content on a range of subjects, from finance and business to travel and home improvements. As a working single mum of two young boys she understands the pressures that today’s working parents face and the topics they want to read about.

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