Credit Ratings

If you’ve attempted to secure a mortgage, buy a new sofa or sign up for a new credit card, your credit rating will have come into play. For many, it is a silent process, and one which goes by unnoticed, resulting in a ‘yes’ from the creditor. For some, it can be rather more troublesome.

If you have experienced problems gaining a loan or credit card because of your credit rating, it can be a frustrating and stressful affair. In this article, we’d like to offer some valuable advice on the often confusing and seemingly-unfair world of credit ratings.

How important is my credit rating?

Very. Your credit rating is essentially a number which tells the companies or organisations from whom you are asking to borrow money how well or badly you have performed under credit terms in the past. A good number means you’ll likely secure the loan, a bad number will probably result in it being refused.

How can I improve my credit rating?

• Always meet deadlines for your debt repayments, whatever they are (mortgage, rent, utility bills, credit cards, loans, etc.)
• If you have an overdraft, use it within agreed terms
• Pay off debts as agreed
• Ensure you are on the electoral role and that your details are up-to-date
• If you have credit agreement defaults or County Court Judgments (CCJs) against you, ensure they are settled
• Don’t avoid borrowing! You need to borrow gently to start with and pay it back to attract a good credit history

What can I do to avoid a poor credit rating?

• Don’t apply for multiple credit agreements within a short period of time. Although it may be tempting to sign up for a number of credit cards at once, doing so can reflect poorly on your credit file
• Don’t exceed your credit limits
• Credit cards can be used to withdraw cash from ATMs, but doing so frequently can negatively affect your credit rating as well as attracting high cherges
• Pay within agreed terms

Credit rating facts

• There is no such thing as a ‘credit blacklist’ – this is an old wives’ Every lender scores you independently and in secret – if they reject you, it doesn’t mean others will
• All lenders have their own systems for assessing clients & their own policies & criteria. Occasionally you may be turned down, even with a good credit rating
• Credit ratings don’t contain intricate details about your life – they are usually sets of financial data, nothing more

Final thought on credit ratings

Your past performance when it comes to financial matters is one of the most important traces you can leave. There isn’t a lender out there which will ignore your credit score, so do all you can to keep it healthy.

Unfortunately, the secret nature of credit ratings and scoring means you’ll never truly know why your application for credit has been turned down. In such instances, it is advisable to use companies like Experian to view your own credit report to check for any inconsistencies.