10 steps to a cleaner credit report

Thinking about applying for credit? Here’s how to make sure your credit rating is up to scratch first…

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With a fresh new year stretching out in front of us, you may be thinking about consolidating your debts and sorting out your finances once and for all.

And thanks to an array of competitive financial deals on the market, there really couldn't be a better time to do it.

But there's just one snag - the best deals require you to have a top-notch credit rating.

Improve your credit rating

Before you apply for any kind of credit, it's worth taking the time to understand your credit rating and make sure it's the best it can be. Should you make an application and get turned down, this will only damage your credit rating and make the situation worse.

But don’t worry - there are a number of steps you can take to polish up your credit score and boost the chances of being accepted. Here are the top 10.

1. Get hold of your credit report

First of all, get hold of your credit report so you know what you're dealing with. The three largest credit reference agencies that hold the report are Experian, Equifax and Call Credit. As information varies, it's worth checking your credit rating with all three.

You can pick up a statutory report for just £2, or Equifax and Experian both offer a free credit report if you sign up for a free 30-day trial - just remember to cancel it once the 30 days are up. Find out more and compare packages at our credit reporting channel.

2. Check your report carefully

Go through your report and check your name, address and details of any County Court Judgments (CCJs), Individual Voluntary Arrangements (IVAs) and bankruptcies are all correct.

Also check whether it displays any aliases - names you were previously known as. If you have had a different name in the past (through marriage, for example), it's important the information on your report reflects this.

If it doesn't, it will have only recorded the credit history you've had since you altered your name and you will therefore need to get a link established between your old name and new name.

If you hold a joint bank account with a partner, so you are financially linked, this information should also appear on your credit report, along with your partner's basic details.

3. Correct any mistakes

If there are any mistakes on your credit report, get them corrected - for example, you're no longer financially linked to someone or a CCJ has been satisfied but is not showing as such. Contact the lender, or ask the credit reference agency to, and get it put right.

If you have had credit in the past and have missed payments due to illness or redundancy you can add a 200-word statement to your credit report to explain the situation. This is known as a 'Notice of Correction'.

4. Get on the electoral roll

If you're not already on the electoral roll, contact your local authority and get yourself on it. Lenders use the electoral roll to combat identity fraud and check you live where you say you do - so make sure you're registered at your current address. If you're not, your application is likely to be turned down.

5. Close down unused accounts

When deciding whether or not to lend to you, financial companies will assess how much credit you already have available to you. The more you have, the more wary lenders will be.

Close down any accounts you no longer use - this includes credit cards, store cards and mail order accounts.

6. Avoid making several applications

If a lender turns you down for credit, don't keep applying everywhere else.

Every time you apply, a footprint will be left on your credit profile. If a lender sees you've made several applications in a short period of time, it may think you're overstretching yourself financially and will also reject your application.

7. Prove you are stable and secure

Lenders prefer to see you have a stable address and a steady job. Therefore if you've moved house a lot or switched jobs several times recently, you will be seen as a greater risk compared to someone who has stayed at the same address or job for a number of years.

8. Manage your accounts carefully

Showing that you are able to manage your existing credit arrangements sensibly - whether it's a credit card, overdraft or mobile phone - will work in your favour.

Make your payments on time each month, even if it's only the minimum. Setting up a direct debit can help with this.

9. Honesty is the best policy

When applying for credit, always be honest. If a lender discovers you have lied on your application, you'll be turned down.

If your circumstances change, for example, you lose your job or get divorced, tell your lender if you're struggling with your credit payments rather than battling on in silence.

10. Use Smart Search

Finally, before applying for a credit card, take a look at the MoneySuperMarket SmartSearch credit profiling tool which not only allows you to compare a range of credit cards but also gives you an indication of how likely you are to be accepted for each card. And it won't leave a footprint on your credit file.

 

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