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Credit rating taken a pummelling during Covid and lockdown? We show you how to get it back on track
Lockdown has taken its toll on all of us, with those who were made redundant, put on furlough, or who suffered a reduction in income due to Covid, all having taken a big hit to their finances.
As a result, some people who had decent credit scores prior to the pandemic may now find themselves with a much poorer rating. This may be due to a missed credit card or loan payment, or because the individual was unable to manage their finances as well as they would do in normal times.
During the pandemic, banks and financial institutions offered payment holidays on credit cards, loans and mortgages. These support schemes gave beleaguered borrowers some much-needed breathing space and helped to soften the blow of Covid.
Throughout the crisis, the Government has maintained that payment holidays should not result in your credit file being negatively affected.
That said, while this credit score amnesty should mean your history has not been impacted by asking for help, it’s not completely black and white.
Lenders could still potentially look at a ‘gap’ in your repayments and view this as a sign of financial stress – and an indication that your finances are not watertight.
While this may make for worrying reading, if you’re one of the many individuals whose finances and credit score have taken a battering in recent months, all is not lost.
There are lots of simple steps you can take to boost your rating.
Here’s our guide to giving your credit score a post-lockdown workout.
Your credit file is a kind of financial CV showing how well you manage credit.
Lenders will use this to assess whether you can afford a product.
A good score can help you get approved for credit cards, loans, mortgages and other forms of credit. It can also help you get better rates and beneficial terms.
What you need to realise is that your score is not fixed. It can go up or down depending on how you manage your credit accounts.
1. Check your credit record regularly – get into the habit of checking your credit report on a regular basis. Make sure everything is up-to-date and correct. If there are any errors, get these amended.
2. Get registered on the electoral roll – this proves to lenders that you are who you say you are and that you live where you say you do. It’s also a sign of stability.
3. Always pay your bills on time – the best way to do this is by setting up direct debits so you never miss a payment. This includes card, loan and mortgage payments, as well as household bills.
4. Sever ties with ex-partners – if you once had a joint bank account with another person, your credit report will link you with that individual. If you are no longer connected, request for a ‘notice of disassociation’ to be put on your file. If not, that person’s credit rating could harm your score.
5. Don’t make multiple applications for credit in a short space of time – taking a scattergun approach can leave footprints all over your record and set the alarm bells ringing with lenders who may view you as desperate for credit.
6. Be sure to carry out a soft search – before making a formal application for credit, make use of our eligibility checker tool to see the deals you are most likely to get accepted for without leaving any marks on your credit file.
7. Watch your limits – aim to keep your credit card balances below 25% of the available credit limit. Don’t exceed your agreed overdraft.
8. Increase repayments on your debts – don’t settle for making just the minimum payment on your credit card each month. Aim to pay off as much as you can. Better still, pay it off in full.
9. Shut unused accounts – close down any accounts that you are no longer using. Do the same with accounts which have been unused for a long time.
10. Consider a credit-builder card – rates may be higher than on standard cards, and credit limits may be lower, but one of these cards can be a real help when it comes to boosting your credit rating. By using a credit-builder card to make small purchases, and then being diligent about paying off what you owe each month, you can demonstrate that you are a responsible borrower. Over time, your score should start to rise meaning you should then become eligible for mainstream cards with lower rates and higher credit limits.
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