Improve Your Credit Score In 5 Easy Steps

by Vinod Gorasia

Now’s a tough time to get anything on credit. Lenders are being increasingly picky about who’ll they offer credit to during the ‘credit crunch’. But you can boost your chances of getting credit by making sure your credit files are up-to-date and clean. Here’s how.

1. Know what the lenders want from you so you can meet their expectations. Generally, credit is extended on the basis of one or both of two assessments. An application may be judged against a lender’s scoring system. They will score your application according to your personal, employment, financial and lifestyle answers.

Being a homeowner may get you a higher score than living in rented accommodation. If the total score is acceptable, a credit check with a credit reference agency will follow.

There are two main credit reference agencies - Equifax (0990 783783) and Experian (0115 976 8747). They hold credit history files on almost everyone. A would-be lender will usually check to see you have existing credit and how well it is managed.

Most lenders are looking for people with a clean credit history without late payments, defaults or county court judgements. Some lenders will accept one or two shortcomings. Many shops will simply do a credit check rather than a credit scoring and credit check.

2. Get a higher credit score - know what you should be focusing on when completing a form. Generally, it is fairly easy to see what a lender is looking for in a borrower - they want you to make the correct repayments at the right times. Accordingly, you can usually work out what the ‘ideal’ answers are to any questions.

The lender wants to see stability and reliability. With employment, for example, someone who is employed and has worked for the same employer for many years would be considered ‘safer’ than someone who has been self-employed for six months. Someone who has existing credit may be viewed more favourably than someone who has no credit!

Clearly, you should always provide honest answers to questions. But there may be ‘grey areas’ where you can answer accordingly. Perhaps you own your own company - an ‘employed’ answer may be better than a ‘self-employed’one.

3. Check your credit history by ordering your files from Equifax and Experian. If you contact these two credit reference agencies, you’ll get details of how you can order copies via the post or through a website; as suits you. Basically, you provide your name (and other known-by names over the past six years), your address (and other addresses over the past six years) and payment.

Do apply for both files. The information that is registered at each agency will vary. Some lenders subscribe to one agency, others to the other one. They then submit information to and access details from only that one agency. What this means is that one would-be lender will probably only see part of your credit history, not all of it.

4. Improve your credit file by submitting ‘notices of correction’ where relevant. If you see incorrect information on your file, you are entitled to have it corrected.

The credit reference agency will provide a step-by-step guide with your file. The agency is not responsible for what is in your file. The lenders submit, correct and remove information. The agency will provide relevant contact details.

If information is correct and negative (late payments, defaults etc), don’t just leave it as it is. It is worth adding a notice of correction, explaining what happened. You can submit up to 200 words direct to the agency.

It is also useful if you had short-term problems (redundancy for example), which have since been rectified. Some lenders will be sympathetic if you have explained yourself and payments have been brought up-to-date since then.

5. Other credit tips and tactics? Having a good mix of credit can be a plus. Lenders like to see would-be borrowers with credit (as long as it is managed well). If you have no credit at all, this can be a black mark with some lenders.

Positive applications - improving your home - are viewed more favourably than negative ones - consolidating debts. Avoid applying for lots of different credit in a short space of time. This can make you seem desperate. Lenders' views vary and you should apply common sense to your own circumstances.

Best Credit Advice: Check your files every three months and keep in touch to make sure nothing turns up that shouldn’t be on there. This is a good way to make sure nothing untoward such as identity theft is taking place in your name!