Five things that lower your credit rating
Being turned down for credit may come as a nasty shock – but there could be simple reasons for it. Just a few key entries on your credit report can bring your credit score down, depress your credit rating and make lenders nervous about you.
Some of these factors could make it difficult for you to borrow. Others will merely mean that you have to pay higher interest than you would have done if you had a better credit history.
So check your credit report carefully with CreditExpert before you next ask for a loan, credit card, mortgage or any other form of credit. Make sure everything is up to date, query any errors and, if possible, take steps to improve your credit status. Then keep checking regularly to make sure that your credit history is as good as it can be.
Read on to find out what to avoid and take action if you think it’s slipping.
- You have missed repayments in the past
The evidence stays on your credit report for 36 months so lenders will see that you may not be reliable. If there’s a reason for a lapse – for example, illness or an accident – you can add a note of explanation to your credit report, which may make a difference.
- You have lots of credit already
Lenders are very cautious about people taking on obligations they simply can’t handle. If you already have several credit cards and loans and owe a lot, you may find it hard to get more. If you have cards you don’t use or a loan with only a small amount left to repay, it’s worth clearing and cancelling them before you ask for more.
- You’ve made multiple applications for credit recently
Many people don’t realise that applications are logged on their credit report and can be seen by other lenders – so don’t regard an application as a quick way of finding out whether a specific deal is going to work for you. This is a mistake, as other lenders may believe you’re desperate for money or even suspect a fraud is being planned. Instead, make sure you tell any potential lenders that you are only asking for information and check whether they are planning to run a credit search on you. If any lenders have misunderstood this request and completed a search without your permission in the past, ask them to set the record straight.
- You aren’t registered to vote at your current address
Lenders use the electoral roll as a precaution against fraud, to check that you are who you claim to be and live where you say you live. It’s easy to let this slip but it can cause real problems – you may be asked to provide documentary proof of your address or even get rejected. Fortunately, it’s easy to put matters right. Download a voter registration form at www.aboutmyvote.co.uk or contact your local council.
- You’ve been bankrupt or taken out an IVA
Most bankruptcies are discharged in a year these days – but that doesn’t mean your money troubles are behind you. The record of your bankruptcy will remain on your credit report for at least six years. During this period, you may find it difficult to get affordable credit – or any credit at all. An IVA – Individual Voluntary Arrangement – is generally regarded as bankruptcy lite but it stays on your record for just as long, with the same consequences. So don’t see either option as an easy way out. Sell a house you can’t afford, go without a car or holiday – it’ll be painful for a few months but easier in the long term.
If you want to check your credit rating and find out how you can start taking control of your credit commitments, you can see your Experian credit report for free with a 30-day trial from CreditExpert, the online credit monitoring service.
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