card guide
Credit Building Tactics

Your Credit Rating and you

There are two main credit rating agencies in the UK: Experian and Equifax.

When credit card companies receive an application for a card they will more than likely run the person’s details past one of these two agencies. It’s the job of these agencies and others like them, to keep on file all applications for credit, whether or not you were successful and details of how you conducted your dealings with debtors when you had that credit.

This information includes your mortgage payments, sometimes it includes utility bills and it can even take into account the area in which you live and whether you are on the electoral roll. The lender will compare the data it receives back from the rating agency with its selection criteria to build up a points profile of you as a potential risk. If you don’t score enough points you are considered to be a bad risk or have a low credit rating.

Don’t Panic

If you are turned down by a lender it’s possible to find out what your credit rating is by writing to the agency enclosing payment for £2.00 and asking to see a copy of your file. Or apply online at one of the numerous websites offering the service.

If you do have a low rating, don’t panic! You can improve it. Here’s how.

Start slowly

By initially getting a credit card designed of people with a poor credit rating you can start to make regular payments into it. These payments should be fairly large and the best thing is to pay them off in full each month.

If you can and you feel like playing the credit ratings agencies at the top of the game, then you can go one stage further. Sometimes loan companies will refuse you credit if it appears from your history that they won’t be able to make money out of you. So for the hell of it you might want to leave a bit in the card for them to nibble at with their interest charges. But whatever you do, don’t leave too much in there as the APR could be soon become crippling.

And remember, you don’t need to do this every month – clear the balance more often than you leave a little for them. What you are doing is demonstrating that you can look after your finances by working the credit card.

Careful does it

The above method should really be called the kamikaze school of credit improvement and it’s not guaranteed to make a difference with all lenders. It requires you to be very self disciplined and if you’re the sort of person that might get carried away with spending or be just too lazy to control your repayments you probably shouldn’t go near this approach.

The building blocks of credit

Instead you could start to build up your credit rating by co-signing with a family member or a good friend on a small loan or credit card. But be aware of

the potential pitfalls of signing up to a joint debt if you fall out with your

co-signee! This is a good building block for young people who are starting out on their journey into credit.

It’s all over

Once it’s all over and your credit rating improves you will quickly get another card. When it arrives, play the game the usual way and give the credit card companies as little as possible!

Whatever you do don’t forget to meet your monthly repayments on any bills you have or your rating will go sliding again. If you do find you’ve forgotten a repayment, contact the company, get them to make a note that you have contacted them and pay it as soon as possible.

If you move house, tell all financial institutions you are involved with and make sure you register on the electoral roll of the new area.

Applications

Every time you make an enquiry about credit it’s recorded on your rating file. So if you are turned down by a company it will be shown. For this reason it is a good idea to avoid making several applications to different companies if you are turned down by one. Given that it only costs around £2 to find out how your rating stands it would be better to get a copy of your rating from the agency before filling in more applications.

Alternatively simply phone the company before applying and ask them if you fit the credit profile they will want; are you the sort of person they will accept? A quick conversation could do you and your credit history a world of good.

Buying time

A little patience is needed before your credit rating gets going, but while you’re waiting for things to start moving you can help them along by getting a few scorecards, but always pay off the balance on a regular basis as these are usually the most expensive type of credit facilities out there. So don’t go grabbing scorecards for things that you don’t already buy, or you’ll end up in a financial nightmare of spiralling debt.

And finally…

Whatever you do, when you get the credit card that you really want, don’t go over your credit limit. You’ll be charged an outrageous sum for the privilege and you guessed it, it will go on your credit rating file.

Be safe, follow good practice and get rid of all those scorecards and close down your original credit account at least until you have got used to handling credit again or if it’s for the first time until you can recognise how you might respond to the temptation of the card!

More Information:
  • Credit Card Advice - CreditCards121 advice section
  • Credit Reports
    Every time a customer applies for a financial product such as a credit card, the credit company will consult that customer’s credit file. This file records all their financial activity in terms of credit applications and banking activity.
  • CCCS - Free non profit association advice
  • APACS information page

Posted on: [ November 03, 2017 ]       Add to Del.icio.us   Digg it   Add to Blinklist   Add to FUrl   StumbleUpon