6 Credit ratings and taking control
The earlier sections might give the impression that your credit rating is controlled by factors you have no power over. This is not true. There are a huge number of ways for you to take control of your rating.
First – as mentioned earlier in the session – check your credit files at least once a year.
This is a vital step. If information held on the files is incorrect you could end up having applications for credit declined as a result of errors. Ideally access the information on the files of the ‘Big 3’ agencies – Experian, Equifax and Callcredit. You might be surprised to find the variations in the information held about you between these agencies. If there are errors get them corrected.
In particular do check your credit files before any major applications (for example, before applying for a mortgage) and if you have an application for credit rejected. In the case of a rejection for credit you need to be alive to what a rejected application does to your credit score: it could have knock-on implications for future applications.
As well as checking your files make sure that you’re registered on the electoral roll or, if you’re not eligible to vote in the UK, that you have proof of residency. The electoral roll is updated annually. Staying registered is vital because if you’re not on the roll it’s unlikely that any institution will want to lend to you.
Next you need to check whether there’s anything about your current or recent domestic arrangements that could threaten your credit score. This issue can relate to current or previous spouses, partners or even housemates. If you are or have recently been associated with someone else in respect of any financial product (such as a joint bank account) then you can find yourself joint-scored by the agencies. So if such a current associate has a poor credit record then this will adversely affect you whatever your own personal creditworthiness. If this is a problem for you then terminate such joint accounts, inform the agencies and get them to send you a ‘notice of disassociation’ from the other person.
Most of the other good tips for managing and improving your credit score come down to ‘good financial habits’:
- Make sure you’re not late or miss completely any credit repayments.
- Get into the habit of paying all your other bills on time – you may never know when details of a late payment find their way on to your credit file.
- Don’t apply for too many accounts – particularly within a short time period. Rejections will count against you and applying too often will make it appear that you’re desperate for credit.
- Dispense with unused credit cards and make sure the accounts are closed. Even though you’re not using them the credit limits for these cards might limit your ability to borrow elsewhere.
- Try to manage down your debts, particularly the more expensive ones, as this can help your credit score.
- Avoid action that can seriously damage your credit score – for example taking out a payday loan.
Maximising your credit score means scrutinising your credit file and applying good financial habits throughout your life. Remember, as well, never to lie when making any applications for credit as, if detected, this could come back to haunt you.