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The Fastest Ways to Fix Your Credit Rating in the UK

payday loanIf you’ve ever been rejected by the bank for a credit card, loan, or mortgage, you will probably know all about bad credit ratings. The term is widely spoken about in financial circles, but few people really know how their credit rating is impacting on them.

Whether you’ve recently been rejected or not, you should certainly take time to learn all about your credit rating. You may not be looking to take out a loan in the foreseeable future, but a poor credit score can impact on much more than a bank loan.

What is a Credit Rating?

Your credit rating is essentially a score of how financially attractive you are to lenders. If you’re trying to get a loan, overdraft, credit card, mortgage, mobile phone contract or even pay for your car insurance monthly, your rating matters. These lenders will ‘rate’ and ‘score’ you to predict your behaviour. In brief this means how likely you are to pay them back – or not as the case may be.

Depending on the product and the lender, the credit rating scoring systems varies, so just because you have been rejected once it doesn’t mean you will be elsewhere.  Your basic credit score means very little unless you are a lender; it is a number that indicates whether it is good or bad. While you might not understand what the facts and figures mean, you need to know what your rating is.

You can often find yourself with a bad credit rating if you miss repayments on credit and store cards, if direct debits return unpaid for things such as phone or energy bills, or you enter bankruptcy. The first sign of trouble is often being rejected for credit.

How Does it Affect Me?

Your credit scoring is important for a number of reasons. Not only does it dictate if you are eligible for any financial products; it also shows whether you’re entitled to the best deals or not. For instance, APR (annual percentage rates) are often ‘representative’, meaning that the better your credit rating, the better the deal you get. Likewise if your score is too low, you might be eligible for a credit card, just not the best deal on the market.

The only credit available to those with poor credit ratings, is available through is what is known as ‘the sub-prime market’. You will be accepted for these deals, but you will be charged high interest rates. This reflects your perceived ‘risk’ – essentially how unlikely you are to meet your repayments.

How Can I Fix My Credit Rating?

The truth is there is no ‘quick fix’ when it comes to improving your credit score. It will take time to build up your credit rating again, but it is certainly worth being pro active right away and striving to give your rating a boost. While they may take some time to come to fruition, there are a number of things you can do to help matters:

  • Make sure you visit websites such as Experien to find out what your current credit score is.
  • Ensure all debts are registered to your correct name and address and that there are no errors (such as someone else’s debt) attached to your file.
  • Space out your applications, lenders will see lots of failed applications in a short space of time as desperation. It is also a good idea to make sure the credit you are applying for, you are likely to get.
  • Prove you can pay it back. Take out a credit card, spend a little on it and make sure you pay it off in full at the end of the month for at least six months.
  • Make sure you are registered to vote.
  • Close any accounts you no longer use, and make sure you always meet the repayments on any accounts you do leave open.

Financial matters are complicated and confusing, especially for people who have little specialist knowledge in the field. It is important however, that you make sure you find out what your credit rating is, and take measures to improve it. Even if your score is quite good, it might be a good idea to take measures to give it a boost.

Claire Brady is a freelance financial journalist who writes about all areas of finance including credit ratings, payday loans, and small business financial advice.

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