Results from a recent report suggest that 80% of Brits have no idea of their credit score. Another study shows that six million of us aren’t eligible for everyday products and services because of our bad credit histories.
As a result, almost three million of us have been rejected for a mobile phone contract, two million turned down for a rental agreement – almost half of British landlords say they’d reject a new tenant with a poor credit rating – and a million have been unable to get car insurance or a job because of a less-than-perfect credit score. So, we really should take control of it, shouldn’t we?
The one financial number we all should know
Each day at Everyday Loans we see the real-life impact and implications that poor credit has. From our nationwide branch network, our expert advisors help customers repair their bad credit histories – back to a stronger financial foothold and return to mainstream borrowing.
We have 50,000 customers in total across the UK and the first thing we do when we receive their initial application is request their credit information that is held by the credit bureau. We undertake a review of bank statements and other money-related documents to give us an understanding of income, spending habits and their ability to pay. We then determine what sort of loan best suites the customer’s individual circumstances and discuss how they can to improve their credit rating in the future.
It is an approach that means we lend to those who are turned away by many mainstream banks and building societies. We meet, we talk. We’re not governed by online processes – we recognise that life isn’t often as straightforward as we’d like, putting many of us in need of financial support from time to time. That’s why we’re here. To help. Just read our Feefo reviews.
So, what is a credit report?
Your credit report or history is essentially your financial report card – indicating how responsible we are with our money. It records information on all our borrowing and current accounts and lots of other financial and public record information about us – current and previous addresses, full name and date of birth.
It’s used to check our reliability before an application for credit is approved. And even if a request is authorised, those with poorer scores will pay a higher interest rate because of the perceived risk they bring.
What Can I Do to Repair My Credit?
The single most important factor when determining credit worthiness is your payment history. We help customers do just that.
We begin by paying off any outstanding debts and bringing any accounts that are currently past due up to date. In brief, keep balances low and make payments on time.
There is no quick and easy way to “repair” or “fix” credit. The length of time it takes to rebuild our history depends on the severity of financial difficulties or oversights and the impact they had on it. It may take months – or even a couple of years – to improve a credit score but it’s well worth it.
Here’s our top seven tips to repairing your credit rating
#1. Work out where you stand
Before you embark upon your credit rehab, get copies of your full credit reports from Experian, Equifax and CallCredit.
Each agency may hold different information and they also use different scoring scales.
Experian’s ranges from 0 to 999, Equifax from 0 to 700 and Callcredit from 0 to 710.
#2. If you find mistakes, rectify them
Another step towards credit repair is to dispute incorrect information within a report. We help our customers with this process.
A recent study showed that, on average, 42% of people who check their credit report find mistakes. That’s the equivalent of almost 10 million people across the country. So, if you do see errors – even small ones – it’s worth cleaning them up as they can make a massive difference.
#3. Stop spending more than you earn
Once we’ve dealt with any mistakes in your credit report, it’s time to ensure you’re not still spending more than you can afford each month. That’s one in ten of us – over 6.5million – according to a recent report.
Again, this is another way in which we support our customers at Everyday Loans. Once we’ve helped ringfence the monthly essentials, we pull together a budget and work with them to stick to it.
#4. Pay all bills on time
Paying bills on time is one of the simplest – and single most effective way – of repairing a bad credit history. If you’re behind on any bill, catch up as soon possible.
Setting up direct debits will help you to avoid missed or late payments, which can stay on a credit file for up to six years. But it’s those from the past 12 months that have more of an impact on it.
To put in simply, credit won’t improve until every bill is paid on time. Budgeting to do so – and sticking to your plan – is essential.
#5. Reduce credit card balances
When we work with our customers to draw up a budget, taking control of credit card balances and repayments is a key consideration. If at all possible, consider paying off a credit card with a lump sum as part of consolidating your debts – if this is affordable.
#6. Be selective about closing accounts
Cancelling cards that are no longer used is a good way of minimising fraud risk, but long-standing open accounts are viewed favourably by lenders, as are higher credit limits.
#7. Don’t apply for credit too regularly
Many applications over a short period can be seen as a sign of financial difficulty – making lenders reluctant to let you borrow. So, resist the temptation to apply multiple times for new credit – whatever the circumstances and incentives.
Be careful to check that when you apply, the lender does a soft credit search, not a ‘hard footprint’. Make too many within two years and your credit score will suffer, delaying the end goal of improving it.
#8. Make sure you’re on the electoral roll
If your name isn’t included, you’ll find it much harder to get credit. You can sign up online in just five minutes by visiting https://www.gov.uk/register-to-vote.