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How to improve your credit rating

Your credit rating is an important factor in deciding if your credit card application is accepted.

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What is a credit rating?
Why are people declined credit?
How do I find out my credit rating?
What can I do to improve my score?

What is a credit rating?

In a nutshell, your credit rating says how risky you are when it comes to borrowing money.

Different lenders will have different ways of calculating this score - there is no single, definitive figure.

A low credit score means you’re the equivalent of that one guy who always accepts a pint, but suspiciously has a train to catch whenever it’s their round.

Your score is a reflection of your credit history, and shows the likelihood that you’ll pay back what you owe on time.

A good credit history could mean that you get better interest rates, a longer introductory period or extra perks like cashback.

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What's in a credit report?

Your credit report contains information about your borrowing habits to help lenders evaluate your credit history. This includes:

  • your personal details and previous addresses
  • any previous names you may have had
  • details of anyone you share a financial account with
  • details of any CCJ’s or bankruptcies from the last six years
  • previous searches made on you by financial companies
  • every application you’ve made for credit in the past six years

You may be able to improve your credit score by making sure these details are kept up-to-date, and can add notes to any records you feel are incorrect.

Why are people declined credit?

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It’s not all smiles and sunshine, however. Lenders will refuse credit to anyone whose credit score doesn’t fit their profile of a good borrower.

There are a number of things that can impact your credit score, and which can hurt your chances of getting a credit card:

  • Not being a homeowner.

No house means no mortgage, which means you have less of a track record in making timely repayments.

  • Having multiple credit accounts within two months of each other.

If you already have two sets of debt, lenders may be nervous about you owing even more money.

  • Making multiple applications within 12 months.

If you’re applying for credit left, right and centre, lenders may think you’re desperate for extra cash.

  • Not using direct debit.

A pay-as-you-go lifestyle may indicate that you can’t budget your finances well enough to make consistent repayments.

  • Not having a credit score.

If you’ve never borrowed money, you might not have a score at all. You may think this shows you’re good with money, but to a lender you’re an unknown risk.

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How do I find out my credit rating?

The three most popular places to find out your credit rating are Experian, Equifax and Noddle.

All three of these have a monthly subscription cost, but they offer a 30-day free trial.

With these you can see your credit score as well as anything that could harm your rating e.g. unpaid bills or multiple applications for credit.

You’ll also be able to see which agencies have run credit checks against you – each check also impacts on your score.

Check out our section on credit checks for more information and to apply.

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What can I do to improve my score?

cut up credit card and scissors

The idea here is to turn yourself into the perfect borrower, at least in the eyes of a credit card or loan company. To do this, it helps if you:

  • Get yourself on the electoral register.

Lenders use the electoral roll to check your name and address. Keeping your details up to date here makes life easier for them and, ultimately, you.

  • Pay all of your bills on time.

Showing that you can manage your money is a must. A few days can make the difference between your score going up and going down.

  • Make sure the details on your credit report are accurate.

Keeping these details up-to-date is not only good practice, but could help you spot mistakes and potential fraud.

  • Try not to use more than 75% of your credit limit.

This shows that you don’t live up to the wire with your debt.

  • Never take out cash on your credit card.

Not only does this incur a fee, but it also reflects badly on your money management.

  • Only apply for one form of credit at a time.

Multiple applications can harm your score.

Regularly spending on these cards – and paying them back on time – shows lenders that you can borrow responsibly.

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