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How to improve your credit rating

Every adult in the UK that has a bank account, has taken out a loan, owns a credit card, pays a bill or has a mortgage will have a credit file that contains financial information about them.

This credit file stores the credit history of what credit transactions have been made to and by that person. Credit files are maintained by Equifax, Experian and several other credit scoring agencies. These credit companies keep a history of what credit you have taken out and how good you are at paying off that credit. If you pay all your bills on time and by the due date and have not moved recently then the chances are that you have a good credit rating. Whereas, if you have recently moved home, or you have missed or defaulted on some credit payments, then it is probable that you do not have a good credit rating. These agencies compile credit histories from a number of sources, including the electoral roll, county court judgments and how effectively past debts have been paid. Every time you open a new form of credit it will leave an electronic footprint on your record. The decision to turn borrowers down for credit isn’t made be Experian or Equifax but by the lenders, based on the lenders own criteria.

A complex mathematical formula is used to give each person a credit score and this score will change from month to month. You will usually be banded into having a good credit rating, a fair credit rating or a poor credit rating.

Look at the credit factors below and this will help you assess what credit score banding that you probably have.

Good Credit Score / Credit History

  • You are employed in the same job with the same employer for a reasonable amount of time
  • You have never missed a payment (such as a utility bill or a credit card payment)
  • You have plenty of credit history

Fair Credit Score / Credit History

  • You may have changed addresses a few times in the last few years
  • You may be in the younger age group
  • You have frequently applied for credit
  • You may have missed some payments or have been late making payment

Poor Credit Score / Credit History

  • You will have missed payments
  • You have mortgage or credit defaults and/or CCJ (County court judgments)
  • You are in bankruptcy or in IVA

Depending on your credit score, when you apply for a new loan (or other credit facility), the lender will request your credit score from one of the credit agencies. If you have a good credit rating, then you will probably be provided with a loan with a lower rate of interest, whereas if your credit rating is poor, then the loan interest will normally be higher.

The Six Top Credit Score Killers

Below is a list of the top 6 factors that will lower your credit score.
  • Not on the Electoral Roll
  • Bad Credit History
  • At Current Address Less Than 3 Years
  • New Job
  • No or New Bank Account
  • Too Many Credit Applications

How to get a Credit Report (Finding out your Credit Score)
If you are interested in learning what your credit score is, or what information these credit agencies have on you, then you can get in contact with them and request your credit report for a small fee.

Online: https://www.equifax.co.uk/
Telephone: 08700 100 583
By Post: You will need to send a £2 statutory fee together with details of your full name, date of birth, and the addresses you have lived at over the past six years, to the following addresses:
Equifax, PO Box 1140, Bradford, BD1 5US.

Telephone: 0870 241 6212
By Post: Request a form from Experian Ltd, PO Box 8000, Nottingham, NG80 7WF

By Post: You will need to send a £2 statutory fee together with details of your full name, date of birth, and the addresses you have lived at over the past six years, to the following addresses:
Call Credit, Consumer Services Team, PO Box 491, Leeds, LS3 1WZ

Other Useful Contacts for Credit Advice
Citizens Advice: The largest provider of free, impartial and holistic debt and money advice in the UK. For your nearest office, see your local phone book.
National Debtline: A free telephone-based information and advice for people in England, Wales and Scotland, Call 0808 808 4000.
Consumer Credit Counselling Service: a charity funded by the financial services industry specialising in debt management plans. Call 0800 138 1111.