Six fixes for credit rating problems

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Credit Cards

We're only human, and we all make mistakes sometimes. The problem with making them in our financial life is that in the process we can cause serious harm to our credit rating - which can create headaches when we want to borrow in the future. Fortunately, all is not lost. Whether you have too much debt, have missed a payment, or simply can't get credit and don't know why, there's a way to fix your credit rating.

We reveal six great fixes.

If you're struggling to get credit, this will be because the bank or credit card provider has decided that you're not a good risk for one reason or another. To make this decision they'll have looked at your credit report, which includes details of all the credit you have available, how much debt you have, as well as your payment history on debts, utility bills, rent and the mortgage.

If you have had a rejection from a bank, there will be something lurking on your report that they don't like, so the first step is to discover what your problem is. You'll need to get hold of your credit report from an organisation like Experian, and check through it.

Once you know what the problem is, there are a number of companies which claim to offer a service which will 'fix' your credit rating. It's worth steering well clear. In the best-case scenario they will improve matters, but will charge you a fee for something you can do yourself. In the worst-case they will fail, possibly encourage you to break the law, and they may even offer you a high-interest loan - which is going to make everything harder in the long run.

Instead you need to get to grips with the six steps you can take yourself.

1. Correct mistakes

If there's a mistake on the report, contact Experian through their online form and highlight the problem. They will mark the dispute on your record and contact the organisation that made the mistake. After investigating, they may make a correction – either way Experian will let you know. If the organisation maintains that the information is correct, you can add a notice of correction, which gives you 200 words to explain why you think the entry is wrong or highlight any good reasons for it.

Another possible mistake you may find is that you are linked to someone in your report to whom you no longer have any links. You can report this to Experian, and they will remove the link.

2. Report fraud

If you discover fraud on your account you will need to call the organisation in question, so that they can deal with the criminals and restore your financial position.

In terms of repairing your credit report, you can call Experian for advice based on your exact circumstances. You can call 0844 481 8000 or email identityfraud@uk.experian.com. You may also decide you want to keep a closer eye on your credit report, and sign up for a service like Credit Expert from Experian, which lets you check your report regularly.

3. Get on the electoral roll

Lenders like to see proof of your address on the electoral roll. If you haven't bothered registering because you don't want to vote, then you'll be marked down by some lenders. It means it's worth getting on the roll regardless. You can sign up at www.aboutmyvote.co.uk. It's also worth ensuring you are not on the edited list, which will prevent your details being sold onto any other organisations.

4. Pay down your debt

There are three reasons why this will help. The first is that lenders like to see regular, reliable payments on time, so you will be building up a positive credit history. This won't wipe out any previous problems you have had paying, but lenders are more interested in recent history, so if you can establish a good period of regular payments they will look on you more favourably.

The second reason is that lenders are interested in the total level of debt you have, and whether it is affordable.

The final reason is that lenders are also interested in how much of the available credit you have used up. If you have borrowed right up to the the limit on all your cards and overdraft, they'll be worried about your ability to pay. If you can show you have plenty of available credit left, they'll see you as a better risk. If you can pay off one or more of these cards entirely and close it down, lenders will score you higher.

5. Pay your bills on time

Utility and rent bills appear on your credit history too, so if you are regularly late in paying, it will show up on your report. Lenders will see this as demonstrating that you're not on top of your finances, and many will give you a lower score as a result.

You cannot undo the records that are already in place, but you can make sure you always pay on time from now on, establishing a good recent history of on-time payments.

6. Don't apply for too much credit

When you're turned down for credit, it's tempting to keep applying for more in the hope that someone accepts you, but you're just making things worse. Each application is shown on your record, and as soon as you have a number of applications over a short time, lenders will be concerned about you.

You can speak to providers to see if they can do a 'soft' check of your eligibility, which doesn't show on your record - or you can enforce a break between applications.

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