If you want to get the best loans and credit cards, you need a good credit report, so today I'm looking at how to make sure you have a tip-top credit report.
Earlier this week, while having breakfast at a local café, I noticed a sign behind the counter which read, "Please do not ask for credit". Given that the most expensive meal on the menu cost about £5, I was surprised that the owners needed to warn customers in this way!
Then again, the rules are similar in the financial world. Some people find it easy to get credit, while others struggle to borrow even small sums at reasonable interest rates. Of course, the larger your disposable income is, the easier borrowing becomes, all other things being equal. However, even fairly affluent people can have difficulty getting credit. Often, this is because of information contained in a credit reference.
The phrases ‘credit reference', ‘credit report' and ‘credit history' suggest that you have only one credit reference. In fact, there are three different commercial companies which monitor and measure your ability to manage credit, known as your ‘creditworthiness'. These credit reference agencies (CRAs) are Experian, Equifax and Callcredit. Lenders use reports produced by one or more of these agencies when deciding whether to lend to you.
So, if you're having difficulty being accepted for credit, then this may be because of problems lurking within your credit report. So, how do you find out more about your credit report, and what steps can you take to improve your creditworthiness?
1. Read your report
Your first step should be to see what information is stored about you at present. Doing this by post costs £2 per report; an instant online report is much more expensive. One easy way to see your credit report from Experian, the largest credit reference agency, is to get a free trial of CreditExpert. This provides you with unlimited online access to your credit report for thirty days.
2. Check for mistakes
When I first checked my credit report more than a decade ago, I found numerous mistakes. Lenders appear to enjoy mis-spelling my surname (D'Arcy). I've been referred to as Mr C D Arcy, Mr Darcey and Mr Diarcy. (Haven't these people read Jane Austen's Pride and Prejudice?)
If you find significant errors in your credit report, then you have a right to correct these mistakes -- simply alert the CRA and wait for the outcome of its investigations. In addition, you can add a short note (say, 200 words) known as a Notice of Correction to your report if you want to bring any extra information to the attention of lenders.
3. Look out for fraud
If you spot something unusual or strange in your credit report (such as a credit agreement that you don't recognise), then immediately bring this to the attention of the reference agency. This could prevent further financial frauds being carried out in your name.
4. Take care of your existing credit
If you want to get credit tomorrow, then be sure to look after your debts today. Your credit record includes both positive and negative information about your previous dealings with lenders. Also, any previous problems with credit will be kept on your file for six years. Thus, if you've missed repayments on a card, loan or mortgage, or exceeded your credit limit, then this will count against you.
5. Don't apply for credit too often
Although I have no interest-bearing debts, I occasionally get turned down for credit. One possible reason is that I've been a ‘rate tart' for many years. In other words, I've saved a fortune by shifting my debts between a string of different 0% credit cards.
Alas, my credit history now marks me out as a skilled credit-card player. Hence, some lenders are reluctant to lend to me, because I make money at their expense. These days, I restrict myself to applying for credit only once or twice a year, and only when I spot a ‘must have' deal. So, if you don't want to leave too many credit searches (‘footprints') on your credit record, don't apply for credit too frequently.
3 Things You Didn't Know About Credit Reports
- Previous occupants of your home have no effect on your credit rating. It doesn't matter if the previous occupant was a millionaire or a bankrupt, lenders aren't bothered.
- You can be turned down for credit if you haven't borrowed enough. You'd think lenders would love a customer with no debts, but they actually rely on the details in your credit report to show them you make repayments on time.
- Your vote counts....sort of. Lenders like it if you're registered to vote, they can then verify that you are who you say you are, and you live where you live.
More: Get Your Free Credit Report
