There is no magic wand when it comes to being accepted for credit. Contrary to popular belief there is no single credit score associated with your name as each lender will calculate your credit score, in their own way, based on your credit history. But there are still ways you can improve your credit score and reduce the likelihood of being rejected the next time your apply for credit.
1. Stop what you’re doing! - If you are constantly being rejected when applying for credit the first thing to do is stop keep applying. It may feel like an itch you need to scratch but every time you apply for credit the company you are applying to will check your credit record. While this does not in itself affect any credit scoring it does leave a 'footprint' on your record. If a company sees a lot of credit checks they may reject your application on the basis that you’ve applied for credit elsewhere at the same time. In future space out applications, not just for credit but for car insurance, mobile phones etc as these all require a consumer credit contract.
2. Check your credit report - The next thing to do is check your credit report yourself to see what might be causing the problem. For the how, what and why on checking your credit report read my post - Money tip #10 – Check your credit report. Check all the details contained within the report and if anything is incorrect then contact the relevant lender directly who will update their records and the credit reference agencies, eventually (usually after a month). If you suspect fraudulent activity has taken place then contact the rating agency in the first instance who can talk you through what you need to do. This will likely involve contacting CIFAS, the UK’s Fraud Prevention Service who can put an entry on your report for protection, and or the police.
3. No history? Then borrowing is the answer - If you are invisible to credit agencies, your credit record will not be spotless, it just doesn’t exist. Put it this way, would you lend money to a complete stranger you know nothing about? For those with not credit history struggling to get a mortgage for example it could be worth taking out a credit card first. Using the card wisely, without incurring charges or penalties, will help you to prove your creditworthiness.
4. Got a credit history yet still struggling to get a credit card? - try Moneysupermarket.com, where borrowers can search for the best deals available according to their creditworthiness. Those with a poor credit history can expect to pay rates of at least 12 per cent for an unsecured personal loan — more than double the price of the best deals.
5. Or if your still can’t get credit - try your bank - Take out a credit card with your bank – your existing bank is more likely to accept you based your history with them . Admittedly the credit card will again have a small limit and a high interest rate but if you manage the account well, this will improve your credit rating. It’s all about building a good credit track record again and it’s a slow process. It’s a bit like the time you pranged your dad’s car when you were younger. It took a long time before you proved to him you were responsible enough to be allowed the keys to his jag again.
6. Register to vote - Lenders and credit reference agencies want to know where you live before they will even consider lending to you. One of the ways they check is to look at the electoral roll to see if you are registered to vote at the address where you claim to live. If you have not already registered to vote then contact your local council.
7. Keep up repayments and never be late – managing your account well will boost your credit score. Make sure you never miss a payment by setting up a direct debut from your current account to pay your credit card bill each month.
8. Stability is crucial - moneysavingexpert say Home owners rather than renters, and those who are employed, rather than self-employed, tend to be accepted more. Putting a fixed (land) line rather than a mobile number on application forms can help with security checks and improve your chances. Being with the same employer, bank and current address for a while all help too.
Click here for the second part of this guide.