Improving Your Credit Rating
What the lenders will want to know…
When applying for any loan or credit the lender will determine the level of risk that the lender is exposed to as a result of lending the money to the loan / credit applicant (consumer or business).
The lenders do not have standardised (universal) criteria on which the applicant is assessed, the sector or institute to which you are applying will have their own algorithm or process for determining the ideal customer for which they would wish to lend too, therefore ranking the applicant in terms of risk (I.e. high to low).
Whilst there is no “magic list” that the credit companies check to automatically qualify or disqualify you from your application, your credit rating is interpreted differently by each company and compared against their ideal customer criteria.
What they will know about you is held by credit reference agencies like Experian, Equifax etc… so the extra questions such as earnings etc… will be for the benefit of the company trying to build up a profile of you.
Ultimately the lenders want to know is how financially attractive you are! What one lender considers attractive is not necessarily what the another lender would consider attractive so don’t assume that because you have bee turned down by one lender that you will instantly be turned down by another
Improving your Credit Rating (Attractiveness) …
Prior detailing how you can improve your credit rating I cant emphasis enough that “universal” credit ratings or “black lists” do not exist! Its all about profiling!
Another key point that I should make is that whilst I use the term risk to describe the lenders assessment, what this actually means is “how much money are we doing to make form this loan or credit applicant?”, because “if the juice ain’t worth the squeeze” they simply wont accept your application.
Now as mentioned there is no 100% guarantee of securing credit through improving your credit score, however by improving it you will improve your attractiveness to lenders.
Electoral roll information – Ensure you are listed as the main credit agencies hold this data and supply it upon application to the institution to which you are applying, so ensure it its current and that you have been listed on it at previous addresses. Contact your local council to check your status.
Court records such as CCJ’s are a hindrance and instantaneously show poor ability to repay finance. Whilst there is no quick solution to removing them, check to see if they are genuine as there are many instances where people have had them placed on their file accidentally – so do check for them!
Ensure your addresses with other lenders all align as if you have various addresses with different credit accounts an accurate picture of your finances can not be obtained and assessed.
Never miss a payment – even if this means just paying the minimum amount owed. Credit companies actually like to see you making just the minimum payments as it means they are making money – some actually suggest that this improves your credit score as it make you more attractive due to the money they can make from you.
Timing your applications is key, lots of applications in short spaces of time will hurt your score so spread them out.
Repair any previous credit problems. Using expensive credit cards and paying them off instantly can show that you are capable of repaying higher risk loans easily. Also Prepaid Cards are a good form of building up your credit, whilst slightly expensive they are worth it.
Where possible get a quotation search and not a credit search so no extra checks go against your file.
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