Five things you can do to improve your credit history

Most people probably realise that nearly every time a lender considers a loan application, their credit history is being checked. Adverse credit history may prevent you from getting a mortgage, a credit card or even a payday loan. There are certain steps you can take to improve your credit history, which will then allow you easier access to credit and will mean lower interest rates in the future. Those five simple steps will help you improve your credit history:

1. Check what’s on your credit file.

Credit referencing bureaux hold a fair bit of data about every one of us. Address history, open lines of credit, history of payments, financial associates, enquires from another lenders – in an ideal world, all this information should be accurate. Errors and mistakes do happen and they usually affect the credit rating in a negative way. Correcting any errors or ommissions in your credit history should be the first step.

2. Register yourself on the electoral roll, even if you don’t ever intend to vote.

Lenders like to confirm and reconfirm everyone’s address – for two reasons. Firstly, they like to know where to call if the borrower defaults on a credit commitment. Secondly, some borrowers like to conceal the addresses where they lived whilst they defaulted on their past credit commitments. Tracing everyone’s address history over the last 3 years allows lenders to get a full picture of borrower’s past behaviour. Make sure the addresses you declare on loan application exactly matches your credit history file.

3. Noting will look better on your credit history than paying all your bills on time.

If you have trouble remembering when your bills are due, set up direct debits to make sure you are never late (ensure you will have enough money in your account to pay it). If you have a credit card, set up a direct debit for a minimum payment – you can always overpay later. Remember that cheques and bank transfers must be sent at least 3-4 business days in advance – lender’s don’t care when you sent it, they want the money in their account by the due date.

4. If you have no credit history, apply for a credit card.

Do it at least a year before you try to get a big loan – a car finance or a mortgage. Use it for small shopping every month and ALWAYS pay the balance in full – this way you will avoid paying interest! One year of responsible management of a small commitment should give lenders enough confidence to trust you with a larger loan.

5. If you have split with your partner recently, make sure the credit referencing agencies are aware of that.

During a relationship breakdown, many people neglect their finances. If you have applied for a credit with your ex in the past and you have since split, write to credit referencing agencies and complete a Notice of Disassociation – do it even if you were not married. This will prevent your credit rating being dragged down by your irresponsible ex-partner who stopped paying their bills. The information about you and your ex-partner no longer being together will be shown on your credit history.

Everyone is entilted to a copy of a statutory credit history report from major agencies: Experian, Equifax and CallCredit. You can also apply for a FREE Experian credit report, which will not only show you the contents of your credit history file, but also calculate your credit score to give you an idea on how the lenders might perceive you. If you forget to cancel the free trial, your card will be charged £14.99 a month. This service will allow you to monitor your credit history and react in case you notice suspicious entiries you do not recognize – this may be a sign of ID theft. You are free, on the other hand, to cancel in the first month and see you credit history file and credit score without any charges. This will be a good start and will allow you to take control of your finance, improve your credit rating and consequently save you money in the future!