COMMENT
How To Improve Your Credit Rating

There can't be many people who manage to trot through life without having to borrow money at some point. Most people aren't born with a silver spoon in their mouth so borrowing via an overdraft facility, a credit card, a mortgage etc is standard.

Regardless of whether you're a borrower or not, everyone has a credit file of some sort and since your payment record will affect the management of your finances, it's important to keep your records as clean as possible. People with bad credit records can't take advantage of cheap borrowing, after all.

The first thing you need to do to ensure your credit file looks good is to make sure you're registered on the Electoral Roll with your local authority. While its purpose is primarily to enable you to vote (and to make it easier for your local authority to collect your Council Tax!), lenders access Electoral Roll information via the credit reference agencies to check your identity and address. If you're not registered, you're going to find it very difficult to even open a bank account let alone borrow money.

Always, always pay your bills on time! Even if you're only a few days late, it'll be recorded on your file for up to six years. Late payments won't necessarily preclude you from getting a loan or credit card - lenders love charging late payment penalties - but it's likely to cost you in the form of a higher interest rate. 

Don't borrow too much. Prospective lenders can see from your file how much you've already borrowed and how much available credit you have with other lenders. If you're looking overstretched, your application for credit could be declined.

Don't make too many applications over a short period of time. This is a major mistake. People make an application and get turned down, so they apply for credit elsewhere, get turned down again and then apply to someone else. Every time you do this, a prospective lender's search is logged on your files and that information is available to every other lender you approach.

Instead, if you get turned down, find out why. It may be something you can easily rectify or explain.

Your credit file can contain mistakes and, as you're allowed to correct any factual errors, it makes sense to obtain a copy of your file to check it. You're also allowed to add a brief statement to your file to explain a problem that might usually count against you - for example, there were missed payments because you were in hospital.

If you have a bad record because of late payments, defaults or County Court Judgements, then there's not much you can do to improve matters except to make sure that your subsequent payments are on time. The longer you've stuck to your side of the bargain, the better it looks, particularly as any defaults or CCJs remain on your files for six years even if you've paid them off. It's quite a long time to have past mistakes held against you and it will lessen your chances of getting decent interest rates for any borrowings or possibly even getting credit at all if your record is particularly bad.

Check your credit report with a free 30-day trial of CreditExpert.