A Beginners Guide To Building A Better Credit Score Continued
In a recent article we explored simpler ways to get a better credit rating – and we published a short guide on how to do this for absolute beginners using a credit card. In our next article on credit we’ll be exploring more advanced methods of credit management.
Check Your Credit Rating With An Agency
Before applying for a loan or credit card, it’s best to check your credit rating with one or more of the three main agencies who track and generate data on customers based on their credit history.
In the UK three main credit reference agencies, Callcredit, Equifax and Experian. You can use Equifax and Experian’s services for free by signing up to a 30 day trial of their services – and using Callcredit’s Noddle service you can access your credit score for free forever. We will be putting up a more detailed step by step article on accessing these services on our blog, so check back soon for that.
You can also request data from any credit agency that holds your information for the price of £2 – this type of full statutory credit report will give you the most up to date available information on your credit score. Follow these links if you’d like to request statutory reports from Callcredit, Equifax and Experian.
Uncouple Yourself From Joint Financial Accounts
If you and a partner have your finances intertwined it can affect each individual’s credit rating and might make it more difficult for you to get things done. If you want to de-couple from someone financially you just need to make a few changes to what you use to manage your money.
There are four ways that joint finances can affect your credit rating:
- Joint bank accounts
- Joint mortgages
- Joint loans
- Utility bills
A quick note on utility bills – they may not affect credit ratings if you and your flatmate are joint payees, but if the utility company has assumed you are partners by sending you bills headed ‘Mr. and Mrs.’ (or a similar combination of the two) this might affect your credit rating.
In order to delink your ratings, it’s probably best to arrange your finances in a separate manner – you can do this through your lender, bank and utility company rather easily, and you don’t need to break up. And if you do break up, make sure to break up your finances too.
When Searching For Loans And Cards, Always ‘Soft Search’
When you apply for credit such as loans, mortgages or credit cards it leaves a ‘footprint’ on your credit file, and too many failed applications, or a lot of applications in a short space of time can affect your credit rating and hurt your future applications.
This is somewhat unfair as the more you’re rejected the harder it gets to get credit when you need it – so what you’ll need to do is use ‘soft searches’. These eligibility calculators offer you a fairly accurate percentage based figure that lets you know if your application will be successful or not. They appear on your credit file for you to see but lenders can’t, so they don’t affect your credit rating.
To find a ‘soft search’ it’s usually a case of googling it – ‘soft search loans’ or ‘soft search credit cards’ are good – but if you need a direct link try MoneySavingExpert’s calculators.
Cancel Old Or Unused Cards
Having a lot of unused credit cards can sometimes make it more difficult to get a loan or mortgage because some lenders see having a lot of unused credit as a risk. The best thing to do is to look at the available credit you have, and if there’s some extra at the very top, cancel it.
What you’re looking to do here is lower your total available credit amount – say your maximum available credit over all your cards is £500, canceling one of your active cards might bring your maximum available credit down to £300.
Having less available credit may make you seem like less of a risk for a lender, and if you never need that much credit it’s good for your credit rating to minimise your maximum amount.
Of course, individual situations may vary, but having fewer open and unused credit cards is always good.
Check Your File For Errors
Follow up anything on your credit file that looks wrong immediately. This could be previous addresses, names, linked accounts, defaults, or anything that looks like it doesn’t belong there.
This could result in you needing to contact the lender or agency that put it on your file, as well as potentially filing a dispute. However, if you genuinely are not in the wrong then it is necessary to open disputes as this type of thing can potentially affect your credit file for a long time.
It’s important to double check your credit file before any major application like a mortgage or change, and even check it as often as every month to make sure your information is up to date.