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Rebuilding your Credit Rating

By: Garry Crystal - Updated: 19 Oct 2012 | comments*Discuss
Rebuilding Credit Rating Scoring Debt

If you have noticed that you are repeatedly refused credit cards and loans the reason may lie with your credit rating. Lenders base their decision on whether or not to give credit on your credit rating, and it is in your best interests to obtain a copy from one of the credit reference agencies. Rebuilding your credit rating will take time, but there are methods that can be used in order to regain control of your financial status.

Obtain a Copy of your Credit Reference

Purchasing a copy of your credit file from one of the credit reference agencies should be your first point of action towards rebuilding your credit rating. Your credit file can be obtained through the post or online for a very small fee from one of the three main credit reference agencies. This credit file will hold information on your borrowing behaviour, missed payments, personal details and county court judgements.

Your actual credit rating or score is put together from all the financial details, and lenders will then asses whether you are a good or bad credit risk. The credit reference agencies cannot decide whether or not you are given credit, this decision is down to the lenders.

Keep Check on your Credit File

You should check your file at least once a year to make sure all of the details are up to date. If there are any incorrect details then you can lodge a dispute, and this will be marked down on your file. You can also add a Notice of Correction on your file; this is a statement that lenders can read regarding any incorrect information. You can also ask the credit agency to notify you when information is updated or if there are any changes; you will be charged for this service.

Borrowing to Rebuild

Although it might sound strange, obtaining credit, even at a higher interest rate is a way to help when rebuilding your credit rating. Taking out credit and then making the repayments on time, in full, or with higher repayments each month will make lenders look on you more favourably. Make sure that if you do know you are going to miss one payment that you inform lenders and make the payment the next month.

Store Cards

A good financial advisor will never usually advise anyone to take on credit in the form of store credit cards. The interest on these cards is exorbitant but they are one way to up your credit score. Again, making payments on time is vital towards keeping missed payment records from your credit file.

Mobile Phone Contracts

Mobile phone contracts are seen as credit, and missed payments to a contract can be recorded on your credit file and will deter lenders from giving credit. However, taking out a mobile phone contract if you have a bad rating is a way to increase your score. You may find that the phone companies are unwilling to give you a contract if you have a bad score, the mobile phone companies also check with credit reference agencies.

Some phone companies will provide you with a contract on the stipulation that you provide a financial deposit. Paying a deposit of around £100 may not seem like a good financial option but it will be refunded if you keep up the repayments. You will also be rebuilding your credit rating over the length of the contract.

Beware of Footprints

When you apply for credit it will be recorded on your credit file; these are known as footprints. Too many of these footprints within a short period of time will alert lenders that you are a bad risk and may have overloaded yourself with too many commitments. Alternatively, you may have been repeatedly refused credit and this will also show up on your file.

Never apply for a loan or credit in the first instance, always ask for a quote. Do not give permission to lenders to use a credit search until you have decided to go ahead with the application. Each credit search by a lender will be flagged on your application, and multiple flags will only deter other lenders.

Avoid Credit Repair Agencies

Credit repair agencies make boasts that for a fee they can repair a bad credit score. There is basically nothing a credit repair agency can do that you cannot do yourself. If you do need financial assistance then go to credit counselling agencies that will not charge you a fee for there services.

Rebuilding your credit rating will take time and willpower. It is vital that you stick to the repayment dates; in some cases it only takes on missed payment to set back your credit score. Never take on more credit than you can handle, and always keep an eye on credit file for any discrepancies.

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