1. Voters Registration
If you don’t register to vote, your name does not appear on the voters roll (electoral register) and you are going to find it very difficult to get approval for credit. You can register online or by traditional mail. Members or tenants of a shared household can register separately.
Just because you have registered does not however mean that you have to vote. If you are concerned about your privacy, you can elect not to have your information listed on the open register. Your name will still appear on the electoral roll but without details that third parties can access or buy.
2. Get A Regular Credit Report
Before you apply for any type of credit, take some time to research your own credit reports and look for any errors or activity that may be fraudulent.
Mistakes can take many forms such as outdated billing address, contact number or terms and conditions of a credit agreement. Update your information with the relevant credit agencies as soon as they change.
The information contained on your credit report should be exactly the same as the information on your credit application. Any differences may result in credit or a loan being refused.
If you spot activity on your credit report that you are not responsible for, it could be fraudulent. Contact the relevant agency immediately and let them know about the activity. You may be the victim of identity theft and someone may be creating debt in your name that you will ultimately be liable for.
Ask the credit agency to add a notice of correction to your credit report file. This notification makes it clear to potential creditors that you are not responsible for the debt and that your credit score should not be negatively impacted.
3. Be On Time
Even if you pay just a few hours after the date you were supposed to pay on, it will reflect badly on your credit record. This is relevant to all forms of credit including a mortgage, loan, credit card or line of credit.
Paying consistently and in the full amount that is due will improve your credit score.
Always pay the minimum repayment on a credit card rather than missing a payment entirely or paying less. However, when you can afford to, pay more. Consistently paying the minimum reflects badly on your credit score and implies that you spend more than you earn.
Consider consolidating lots of smaller debt into one debt. If you have lots of credit cards, consolidate into a 0% balance transfer card. This will allow you to repay your debt, interest free, for a specified period. This process can also be used to consolidate your personal loans.
Consolidation provides you with the benefit of having only one amount to pay making it easier to manage your debt while reducing the amount that you owe. However, it is still critical to make that repayment on time.
4. Get Credit
If you don’t have any credit, it is impossible to score you according to your credit history. A creditor or lender simply has no proof of whether you meet your financial obligations, on time to assess if are a good or bad risk.
A mobile phone contract or utility bills can create the groundwork for establishing a good credit score. You can take out unsecured personal loans with no collateral.
An interest-free credit card or line of credit is also a good option. But be aware that you need to repay the full amount at the end of every month so make sure that you don’t spend more than you can afford. Be aware that exceeding your credit limit or extending it makes you appear less trustworthy.
Keep your credit utilization or limits on your credit cards and facilities low. Credit utilization is the percentage of the limit that you spend. For instance, if you spend £1,000 on a credit card that has a £2,000 limit, your utilization is 50%.
The lower the percentage, the better the impression you make and the better your credit score will be. Experian advises an ideal utilization percentage of below 25%
5. End Financial Associations
If you have entered into an agreement with another person for joint credit in the last 6 years, you have established what is referred to as a credit association. Your credit record will therefore be linked to their credit record.
If they have a bad credit score and fail to make payments in full when they are due, it will reflect badly on your credit score. However, this does not work the other way around. If you financial associations have good credit habits, it won’t impact your credit score positively.
It is therefore recommended to close financial associations whether they are good or bad. You can either move the credit to an individual account or pay off the balance owing on the relevant account to close it.
You will then need to contact the relevant credit agencies and inform that the financial association has been closed and to add a relevant note to your credit record. Any future activity on the other person’s account should no longer have any impact on your credit score.