Best ways to boost your credit rating

Your credit history will mean the difference between getting a mortgage or a excellent sell on insurance or not – so it’s vital you try to can appreciate how this secretive world operates.

Even people with a decent credit history are currently having crisis borrowing. But you can boost your charge score to ensure you get the right financial deals.

We asked Martin Lewis, founder of moneysavingexpert.com, for a sneak preview of the advice he reveals on Tonight with Trevor McDonald this Friday on ITV1.

Here he answers you credit queries…

Q: What precisely is my charge rating?

A: Credit ratings are a myth – they don’t exist in the UK. I’d like to blow that myth out of the water after and for all. Every precise lender scores you centered on its “perfect customer” wishlist.

Q: OK, so how do lenders credit score me?

A: Lenders are in fact trying to anticipate your behaviour based on your past financial history to see how happy a bet you are. This applies to loans, mortgages, charge cards, mobile phone contracts or even monthly car insurance.

Their scoring systems are phenomenally complex and secretive and vary of lender to lender. So just because one company rejects you, don’t automatically assume people will.

Q: Will they reject me for being high risk?

A: Banks decide on customers for their own favorably – not yours, so the scoring process is about profit not risk. Of route gamble plays a part, so if your history suggests you’re unlikely to repay you’re a threat to profits.

But even good bets may be rejected if they’re unlikely to act in a way that’ll make profit for lenders. For example, if you always pay in full and avoid interest, banks can’t make money from you and you may actually be weeded out and rejected!

Q: How do lenders get details about me?

A: Firstly they is planning to step up a lot from what i read in your application form – along with your salary, family size, reason for the loan and whether you’re a home owner. So issue out sure you fill the forms in carefully – one pitiful mistake might straight off kibosh any application.

Secondly, they use any previous dealings with you to allow predict your behaviour. So you’ll often get a better deal from a firm you already have one product amongst – while you haven’t missed payments.

Lastly there’s your credit file with key financial information including who you are, at which you live – and most importantly – details of all your credit agreements going returning six years.

Q: Can I check my credit file?

A: Yes, and you should. You have a legal right to see your file for £2 by pass on from all three of the major agencies: Experian, Equifax and Callcredit. Check all 3 but watch out as they’ll try to sell you extras, such as a yearly credit update. If you’re canny you can get free of charge month-long trials for one of these services and check your files for free. Simply sign up, grab the passcode, take a look at your charge file – but be sure to cancel before the direct debit starts.

Q: What am I looking for?

A: Watch out for every mistake – even tiny ones. Are all your debts correctly listed? Are there any inaccuracies on your repayment history? Also, check your present and past address details. Errors right here can trigger to you being judged on a person else’s charge history.

If you see errors, spit out to the company and request they’re changed.

Q: How can I boost my charge score?

There’s plenty you can do to boost your attractiveness. Think of it as a beauty contest – you need to appear clean, groomed and sexy and remove any ugly marks from your history!

For the Tonight demonstrate I encouraged my circumstances studies to recreate these steps...

(1)Get on the electoral roll If you’re not on the roll, you won’t get any credit. Write to your local council to ensure that you are. For those who aren’t eligible to vote (mainly worldwide nationals), send all the credit reference agencies proof of residency and ask them to add a note to substantiate this.

(2)Time your applications It’s hugely unfair, but every time you apply for credit products, it adds a search to your file, and lots of searches in a short space of age hurts your score as it instigates you seem desperate for credit.

This can get you into a “rejection spiral”. So space out applications, not just for credit, but for car insurance, and even mobile phones – as it can all leave searches on your file.

Moving house also disrupts a score, so trigger any important applications before moving. Plus you’ll score better when you’re earning, so if you’re antsy roughly potential redundancy apply now.

(3) Build up a viable charge history If you experience no credit history it’s more difficult for lenders to predict future behaviour and you’re greater amount of likely to be rejected. Believe it or not a smart way of making up a credit history is to take out a hideously costly credit card – and just spend £50 on it a month for a year – ensuring you pay the full amount every month to hold off interest. This is too one way to help rebuild your history if you’ve had bad debts or bankruptcy in the past.

(4) De-link from former partners If you once shared a joint mortgage or bank account with an ex – or that much a flatmate – then be warned, their bad credit can affect yours for years after.

So if you split up with a person you joined finances with, subsequent to the accounts are separated write to the credit file governments and ask to be “de-linked”.

(5)Have a basic out and cancel session Many of us forget to cancel unused card and accounts, but they can scupper applications.

One girl on the show had an old mobile phone account she’d forgotten about that was £5 in credit but was much damaging her charge score.

Having too much credit can count against you – so shrink your available charge if you don’t need it. Remember to cancel the credit card account, don’t just cut up the card. But do hang on to long-standing bank accounts, as a good banking history can be helpful.

The best prepaid cards are a fantastic alternative to credit cards, especially for those worried about debt.