9 Quick Steps to Sort Your Credit Out!

Most of us skip happily along using our debit cards and cash to pay for most incidental payments in life, like a round of drinks but this won’t do when it comes to the larger acquisitions such as buying a home or a new motor.

For these, you’ll most likely have to apply to use credit for the purchase. All well and good if you’ve built up a good credit rating, but you’re in for a rude awakening if you apply for credit and find yourself rejected because your credit rating is poor. And the rejection itself worsens matters…

How can you give yourself the best chance of success when you apply for credit? Here’s our 9 top tips.

1 Obtain an up-to-date credit report

You essentially have 3 main credit reference agencies (CallCredit, Experian and Equifax) which track your borrowing habits and record their findings.  It’s their reports which lending companies use to decide whether to offer you credit.

So your very first port of call is to get an up-to-date report from one of these companies; it’s likely to be free or very low cost and will give you an immediate impression of how any credit application from you might be viewed.

2 Note any mistakes in your report and correct them

You may find something as seemingly innocuous as an incorrect address for you on the report.

The fact is, people often have a bad credit rating because they’re linked to a property which has bad debt associated with it.

So given how significant factors like addresses or whom you are financially linked to are in forming your report, it makes perfect sense to contact any company which the report indicates has incorrect information about you and get them to update their records.

3 Ensure you’re on the electoral roll 

You’ll always gain in credit report and score terms from being on the electoral register.

It’s a public record of who you are and an address you either live at or are attached to and these facts are checked.

So always ensure you’re on it and that the details held are correct.

4 Apply for a credit card…and use it carefully! 

It’s well understood that misuse of credit cards can create financial nightmares for many.

The fact is, however, that if you use one carefully, you demonstrate exactly what credit reference agencies regard as virtuous behaviour.

It’s all about building a history which demonstrates that you can be given credit and pay it back in the way the lending company wishes. And if you don’t have a credit history, this is how you can build one!

You should only use your credit card in situations where you know you can pay off the debt fully each month. Mortgage lenders are clearly more disposed to lending to people who have a history of making required regular repayments.

If you’ve made mistakes with credit cards in the past, you may have to apply for one from a company which accommodates those with poor credit ratings. It’s likely that the interest rates quotes might be frightening but you’ll never suffer them if you make your monthly full repayments on time.

5 Stay put in the same address for a while

You have to move location from time to time in life for any number of reasons. The trouble is that credit reference agencies prefer people to stay at the same place as they view this as a sign of stable behaviour.

Not least, if you fall into debt then there’s a clear address to chase you to whereas if you move around a lot, it may be a sign that you’re running away from creditors.

So staying put also helps your credit rating.

6 Keep credit applications few 

Each time you apply for credit, the credit reference agencies are notified and if a number of notifications are received over a short period of time, this can give the impression that your need for cash is desperate.

It’s best therefore to keep those applications few and, if your application is ever refused, don’t apply for anything further for at least 6 months. This is because your credit standing takes a hit every time you get a refusal and makes it more likely that you’ll be refused again, a potential vicious circle if you make further applications.

7 Don’t withdraw cash with a credit card 

You always face high charges for withdrawing cash using a credit card but did you know that your credit rating takes a hit every time you do this?

It’s ‘red flag behaviour’ for the credit reference agencies which has even been known to be a chief factor in failed mortgage applications.

You’re much better off getting an agreed overdraft facility but only if you stick to your overdraft limits. 

8 Never take up Pay Day Loans

Similar ‘red flag behaviour’ is taking up a pay day loan; you’ll face ridiculously high repayment interest rates and credit reference agencies always view this activity as a sign that you aren’t controlling your finances well.

It’s better to use alternatives like organising an overdraft facility as before.

9 Let time elapse 

If all else fails, in credit terms time heals all ills – this even includes situations like bankruptcies and repossessions, which stay on your credit file for 6 years.

Overall, it’s best to develop good credit habits to start with and, if you find yourself in a hole, stop digging!


By Marcus Simpson


SAM Conveyancing