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Friday, 18 April 2014

Top tips to improve your credit rating

In financially tricky times it’s sometimes useful to get a little extra help with money. However, organisations are often reluctant to lend money to people without a good credit rating.

Here are some useful hints and tips on how to improve your credit rating to make borrowing money easier should you need to do so in the future:

What is a credit rating?

A credit rating evaluates whether or not a debtor, the person or entity looking to borrow money, is a suitable candidate to be leant to. It is a way of determining the likelihood of them being able to repay the money instead of defaulting.

This evaluation is carried out by credit ratings agencies that use their expertise to examine public and private information regarding the debtor's economic history.

Boosting your credit rating

You can look online at different types of credit provider and the sort of deals they offer. Many, for example aqua, have useful websites which will tell you which sort of credit card may be suitable for you.

Get on the electoral roll

The first piece of advice to offer if you’re looking to improve credit rating is to get on the electoral roll. This will reassure potential money lenders that you are who you say you are and that you really do reside at the address you have given them.

This sort of identity confirmation is useful for banks as the Electoral Commission go to great lengths to ensure the information they have about each of their citizens is correct to prevent fraud. Fraudsters are unlikely to go to these lengths to set up an account under a phoney name.

Check your rating online

Everyone has a right to see their credit files and check their rating. You can do it for free online, using sites such as Equifax, Experian and Callcredit. Make sure you check every detail; people have been rejected credit because of unused (but not cancelled) mobile contracts or addresses that haven’t been updated after a move, so it’s extra important you’re aware of what’s on your file.

It’s also a good way of checking for any products that aren’t yours, in case of ID fraud. Check before making any big applications to minimise your risk of rejection.

Don’t miss payments

Another essential action to take when thinking of taking out a loan is to ensure you do not miss any payments you are obliged to make. This is because some providers of services, such as energy or phone companies, share your information with credit ratings agencies. Your potential lender may be made aware of any time your payments may have been late.

Even companies who do not share this information reserve the right to do so, which means it is important to stay updated on this.

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