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Three ways to improve your credit rating

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What can you do if you have been refused credit? There are some basic steps that you can take to improve your credit record and your credit rating.

Make sure you are on the electoral roll

Lenders will usually make some reference to the electoral roll to provide proof of address. They may also use it to show length of residence at an address (although new voters will only show up as being resident in their home since their 18th birthday). Long-term residence at an address makes you a better credit risk, as does home ownership. If you are not on the electoral roll at your current address, lenders will probably ask you for your previous address and ask you for further ID for your current residence.

Keep an eye on your credit file

You should obtain a copy of your credit file from the three credit reference agencies on a regular basis, to make sure the information on the database is accurate and up-to-date. Account defaults, County Court Judgments (CCJs) and individual voluntary arrangements (IVAs) remain on your credit record for six years, but as time passes the damage they have done to your record lessens in the eyes of lenders.

Positive credit markers

  • Being at your current address and on the electoral roll for a number of years
  • Being in continuous employment for a number of years
  • Paying existing credit commitments on time
  • Being a homeowner
  • Having a small number of existing credit facilities
  • Having a low income to debt ratio

Negative credit markers

  • County Court Judgments (CCJs)
  • History of not making debt repayments on time
  • Inconsistent address and employment history
  • A large number of searches performed on your credit file

    • Pay your bills on time and keep a check on spending

    If you have had a poor credit record in the past it will be improved by showing that you can now meet your obligations. Credit is a useful tool to allow people to run their lives efficiently, and acquire goods and services that they need immediately but are then able to pay for over time.

    Lenders are, however, encouraged to implement a responsible lending policy, and not to grant large amounts of credit to those who cannot afford to pay it off.

    If you have been turned down for credit you shouldn't apply for any more credit until you have checked the state of your credit file. If you have an adverse credit history, and your credit score is low, this could be an indicator that you can't afford more borrowing and need to get your existing debts in order before you apply for any further credit.

    If you are having problems gaining credit, the first step should be to review your spending, and if you are having problems with debt seek advice from a debt counselling service.

    09 December 2005 © Moneyextra.com

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    Our senior editor Robin Amlôt recommends you should consider taking independent financial advice before acting on any article. Please contact us for help with your individual circumstances if any assistance is required.