Improve Your Credit Record

If you can improve your credit record you will increase your chances of being able to get out of debt by refinancing your debt at a lower rate of interest. So here are some of the best ways to boost your credit score.

1. Improve Your Public Visibility

One of the best ways to improve your credit record and get lower interest loans is to be registered to vote.

Firms who assess your creditworthiness will normally confirm your address against the list of people who are registered to vote. This information is also used by the credit reference agencies when they are compiling your file.

The fact that you appear on this public record is seen as a good sign of you honesty, and anyone who doesn't appear on it is viewed with suspicion by lenders.

So make sure you get your name on the voters' roll or electoral register.

2. Only Apply For Credit When You're Confident Of Being Accepted

Any refusals will be recorded on your credit history, which will count against you in the future. As soon as a lender sees a whole pile of credit refusals, they'll either add to your list of refusals or offer you a loan at a higher rate of interest.

As a rough guide, if your regular debt repayments take up more than 36% of your monthly income, you’re in danger of being refused credit.

If you want to work out your debt to income ratio, try this.

Total up your monthly income (after tax). Include all wages and any overtime, commissions or bonuses that are guaranteed. Then add any other forms of regular income such as interest or maintenance payments.

If your monthly income varies then calculate the monthly average over the past two years (add all your income over the past two years and divide the answer by 24). Now add up your monthly debt repayments. Remember to include payments for credit cards (use the minimum monthly repayment figure), personal loans, overdrafts and mortgages. Finally, add any monthly rent that you pay.

Then divide your total monthly debt repayments by your net monthly income. The answer is your total debt-to-income ratio. If you had a monthly income of £1000 and monthly debt repayments of £250, your debt-to-income ratio would be 250/1000 = 0.25 or 25%.

The important limit is 0.36 or 36%. Keep below this and you are much more likely to be offered credit at reasonable rates of interest. The lower your ratio is the better deals that you’ll be offered.

3. Pace Your Credit Applications

Lenders start to worry if they see a sudden avalanche of credit applications on your file. They may draw the conclusion that you’re applying for it all at once so that you can honestly answer the ‘how many other loans/credit cards do you currently have?‘ type question, that appears on most credit applications.

4. Carry Fewer Cards

Again, lenders don't like to see anyone who has access to excessive amounts of credit. They worry about getting their money back if someone uses all the credit that's available to them.

So write to your card issuers and request that they close your accounts then report this change of status to each of the three main credit reporting agencies.

5. Pay Your Bills On Time, Everytime

Late payments also make lenders nervous. Even paying the minimum, although it’s not perfect, is much better than nothing. Payments that are more than 30 days late will have a negative effect on your credit rating.

6. Avoid Black Marks On Your Record

Credit reference agencies, such as Experian and Equifax, tend to place more emphasis on bad reports (such as court debt judgements, credit application failures) than good reports (such as loans that have been paid off successfully). Negative details will remain on the files of the credit reference agencies for six years. So it’s a good long term strategy to avoid bad reports and build up as many good reports to your name as possible.

7. Avoid all those ‘credit repair’ companies that claim they can improve your credit record

They can….at a price! You know, the type you see advertising in the back of national newspapers, claiming that they can remove County Court Judgements (CCJs) or other court decrees that exist against you name.

It can’t be done. Let me say now, court judgements and decrees that haven’t been set aside and have been correctly registered against your name can’t be removed….by you, a credit repair company or even superman!

In England and Wales, if you’ve received a County Court Judgement (CCJ) it will remain on your credit file for six years. No more, no less!

But all is not lost! Once you’ve paid the debt in full, what you can do is to apply to the serving court for a ‘certificate of satisfaction’. This proves that the debt in question has been paid. Then all you have to do is to send this to the credit reference agencies. They will use it to update your credit record.

So forget using a credit repair company. These shady characters are nothing more than a front for a lender or a broker trying to sell you a loan.

These credit ‘repair’ companies can’t do anything that you could not do for yourself. Using the details that I have just provided, you can easily take steps to improve your credit record yourself. And in the process allow you to refinance your current debts to a much lower rate of interest.

Return To Part 1: Improve you UK credit rating

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