Credit where it's due to you - how to borrow what you need

If you are applying for credit - a mortgage, a loan or a credit card - you may well find that, in the current "credit crunch" conditions, lenders are more likely to be shopping around for customers than the other way about.

The shortage of funds available in the market means that lenders can cherry-pick the borrowers they are prepared to lend to. Think of the situation as being like the television show Blind Date. The lender is out on the front of the stage telling the audience what appeals to him in a partner, and you are one of several candidates behind the screen trying to make yourself sound attractive to win the date.

Therefore, if you want to clinch the deal, it may be time for a bit of a money makeover.

Check your credit rating

This is the financial equivalent of taking a long hard look in the mirror. You will see all your good and bad points, but essentially you will see if there is something amiss that you can do something about.

It is a good idea to make regular checks on your credit file, even if you don't need to borrow. This is to make sure that any other borrowing you have had in the past, which has now been paid off, is shown as cleared, and that all the records on your file are correct. You should pay particular attention to unfamiliar entries on your file, which could indicate ID theft. If you find evidence of a loan agreement or mobile phone contract that you have never entered into, you should take immediate action.

Is your credit record correct? Check your credit reference, credit file, credit score with CreditExpert from Experian.

Clean up your accounts

Close unused credit cards. While you may have no debts outstanding, a large number of credit cards mean that you could potentially borrow on all of them, giving you a seemingly huge line of credit. This result of this could mean that a new lender will be unwilling to give you still more.

Pay off loans that you don't need

If you have cash in the bank, and you still have loans outstanding, consider paying off any lending you don't need. But don't forget to look out for early repayment penalties. If your lender charges a fee for early repayment, do the sums before you settle up. If the penalty is more than the interest you would otherwise pay you might as well hang on.

Want the personal loan that is right for you? Find it with Moneyextra's comparison service.

Be a good citizen

Lenders like customers with "stable" lifestyles. Factors as simple as having your name on the electoral roll, or having a landline telephone, help to give this impression. So take action on these fronts if you need to.

Move quickly to secure a good deal

This is particularly important if you are applying for a mortgage. Offers are being withdrawn all the time, so don't delay if you are going to need a loan in the next few weeks. You can usually book a mortgage deal in advance, and can reserve an offer for between three and six months, so get your arrangements in place now if you are thinking of moving, or have a fixed- rate deal coming to an end in the next six months.

09 April 2008 © Moneyextra.com

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Moneyextra.com 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.