How to boost your credit rating

Your credit history could mean the difference between getting a mortgage or a good deal on insurance or not – so it’s vital you try to understand how this secretive world operates.

Your credit history could mean the difference between getting a mortgage or a good deal on insurance or not – so it’s vital you try to understand how this secretive world operates.

Even people with a good credit history are currently having trouble borrowing. But you can boost your credit rating to ensure you get the best financial deals.

We asked Martin Lewis, founder of, for a sneak preview of the advice he reveals on Tonight with Trevor McDonald this Friday on ITV1.

Here he answers you credit queries…

Q: What exactly is my credit rating?

A: Credit ratings are a myth – they don’t exist in the UK. I’d like to blow that myth out of the water once and for all. Every individual lender scores you based on its “perfect customer” wishlist.

Q: OK, so how do lenders credit score me?

A: Lenders are basically trying to predict your behaviour based on your past financial history to see how good a bet you are. This applies to loans, mortgages, credit cards, mobile phone contracts or even monthly car insurance.

Their scoring systems are phenomenally complex and secretive and vary from lender to lender. So just because one company rejects you, don’t automatically assume everyone will.

Q: Will they reject me for being high risk?

A: Banks pick customers for their own good – not yours, so the scoring process is about profit not risk. Of course risk plays a part, so if your history suggests you’re unlikely to repay you’re a threat to profits.

But even good bets may be rejected if they’re unlikely to act in a way that’ll make profit for lenders. For example, if you always pay in full and avoid interest, banks can’t make money from you and you may actually be weeded out and rejected!

Q: How do lenders get details about me?

A: Firstly they will gain a lot from your application form – including your salary, family size, reason for the loan and whether you’re a home owner. So make sure you fill the forms in carefully – one tiny mistake could immediately kibosh any application.

Secondly, they use any previous dealings with you to help predict your behaviour. So you’ll often get a better deal from a company you already have one product with – provided you haven’t missed payments.

Lastly there’s your credit file with key financial information including who you are, where you live – and most importantly – details of all your credit agreements going back six years.

Q: Can I check my credit file?

A: Yes, and you should. You have a legal right to see your file for £2 by post from all three of the major agencies: Experian, Equifax and Callcredit. Check all three but watch out as they’ll try to sell you extras, such as a yearly credit update. If you’re canny you can get free month-long trials for one of these services and check your files for free. Simply sign up, grab the passcode, check your credit file

– but be sure to cancel before the direct debit starts.

Q: What am I looking for?

A: Watch out for every mistake – even tiny ones. Are all your debts correctly listed? Are there any inaccuracies on your repayment history? Also, check your present and past address details. Errors here can lead to you being judged on someone else’s credit history.

If you find errors, write to the company and request they’re changed.

Q: How can I boost my credit score?

There’s plenty you can do to boost your attractiveness. Think of it as a beauty contest – you need to appear clean, groomed and sexy and remove any ugly marks from your history!

For the Tonight show I encouraged my case studies to follow these steps.

(1)Get on the electoral roll If you’re not on the roll, you won’t get any credit. Write to your local council to ensure that you are. For those who aren’t eligible to vote (mainly foreign nationals), send all the credit reference agencies proof of residency and ask them to add a note to verify this.

(2)Time your applications It’s hugely unfair, but every time you apply for credit products, it adds a search to your file, and lots of searches in a short space of time hurts your score as it makes you seem desperate for credit.

This can get you into a “rejection spiral”. So space out applications, not just for credit, but for car insurance, and even mobile phones – as it can all leave searches on your file.

Moving house also disrupts a score, so make any important applications before moving. Plus you’ll score better when you’re earning, so if you’re concerned about potential redundancy apply now.

(3) Build up a good credit history If you have no credit history it’s more difficult for lenders to predict future behaviour and you’re more likely to be rejected. Believe it or not a good way of building up a credit history is to take out a hideously expensive credit card – and just spend £50 on it a month for a year – ensuring you pay the full amount each month to avoid interest. This is also one way to help rebuild your history if you’ve had bad debts or bankruptcy in the past.

(4) De-link from former partners If you once shared a joint mortgage or bank account with an ex – or even a flatmate – then be warned, their bad credit can affect yours for years after.

So if you split up with someone you joined finances with, once the accounts are separated write to the credit file agencies and ask to be “de-linked”.

(5)Have a clear out and cancel session Many of us forget to cancel unused card and accounts, but they can scupper applications.

One girl on the show had an old mobile phone account she’d forgotten about that was £5 in credit but was still damaging her credit score.

Having too much credit can count against you – so shrink your available credit if you don’t need it. Remember to cancel the credit card account, don’t just cut up the card. But do hang on to long-standing bank accounts, as a good banking history can be helpful.


Category: Credit

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