Basic Financial Guide to Improving your Credit Record

By: James Miller

Before you begin reading this article here are some helpful definitions. Bad credit rating : When you make an application for any kind of loan, the would-be loan provider will look at your credit report to assess your credit eligibility. He will consequently give your application a credit score such as bad, good or excellent. If it's a bad credit rating, it will be challenging to get credit. A credit score can be termed bad when you have a weak financial record. Late or ignored monthly payments and legal judgements will reduce your credit rating.

A credit record is really a record of whatever credit you have accessed in the past six years. It discloses how much money you have borrowed and if you have failed to make any monthly payments etc. A credit record gives opportunity for potential loan companies to investigate your credit history to enable them to make a determination as to whether to grant you a loan. The data on your file is complied by credit reference agencies like Equifax and Experian. They use information from public documents (e.g. the electoral roll, CCJ's or County Court Judgments etc) and from lenders as well as financial institutions: e.g. credit applications, credit accounts.

Prime lenders are appropriate for people with a spotless credit history. Prime lenders normally give the most favourable interest and also the least charges for borrowing funds, subject to you fulfilling their conditions. When you have late or ignored instalments on any other credit within the last 72 months, it is not very likely you will satisfy the requirements of a prime lender. In the event you do get accepted and your credit history is less than perfect, then it's likely you will have to pay more in interest than others with a more agreeable history.

When referring to a 'sub prime' lender, this is a lender who gives loans to anyone with negative or low credit scores. A normal borrower of a sub prime lender would be anyone who runs into difficulty when trying to secure a loan from the usual providers. This is due to them falling into financial turmoil at some point in their lives and now having a bad credit rating. Sub prime mortgages are also known as Non conforming mortgages.

If you find that you have been declined credit due to having a poor credit report (also known as a credit rating or poor credit score), then don't despair. There are ways that you can improve your credit file, but you must be aware that it does take time and patience.

However, the positive news is that once your credit report is looking better, you will find that it opens more doors for you, making it easier to get credit and at more favourable rates.

First and foremost, get a copy of your credit report from one of the major credit reference agencies, such as Equifax, Experian or CallCredit plc. The cost starts from around ?2.

Check your file for any inaccuracies - maybe there is a satisfied debt that is still showing as outstanding or maybe there is someone listed as a financial association who you no longer have financial ties with (such as an ex-partner)?

If you see anything on your credit file that you do not agree with, then contact the relevant organisation.

Check that you are shown on the credit report as being listed on the Electoral Roll - this proves where you reside. If you are not on there, then this will affect your credit report negatively.

Once your credit report is in order, tackle the other side of things! Make sure that all your bill payments are made on time so that your report is squeaky clean.

If you do get declined for credit, find out why - do not go applying for credit elsewhere willy-nilly as this will look like you are having financial problems to a potential creditor.

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