If the data on your credit report is accurate, and has led to you being refused credit, there are a number of steps you can take to improve your standing.
Adding 'Notes of Correction'
If the data on your file is accurate but doesn't give a true representation of your current standing, you can add a 'note of correction' (up to 200 words) to the report. For example, it may explain a situation where you were made redundant temporarily, and as a result fell behind with some mortgage payments. Naturally there may be many things you can contest with explanations and justifications, and you're welcome to do so. As long as they sound reasonable, they will be taken into consideration when assessing the risk you pose.
Things you can do now
There are a few things you can do or check to immediately improve your score
- Electoral Register Check that you're registered, and with the correct details. Anyone not registered will find it difficult to get credit as it's more difficult to verify your identity and details.
- Unused Credit Cards Cancel any unused cards you have as creditors look at the total amount available to you, and not just what you're currently indebted for.
- Stop Applying If you've been refused credit, resist the urge to apply for any more until you've improved your rating. Refused requests remain on your file and stack-up against your score.
Things you should do long-term
Keeping a worthy credit score is a lifetime commitment, and there are a number of good practices you should try and abide by in order to avoid future problems. It goes without saying that you should look to borrow sensibly, and not overstretch your finances. This will allow you to keep current commitments paid on time, and your file free from blemishes for late payments. It's worth noting that late and missed payments remain on your file for 6 years, and frequent occurrences will look like an inability to pay, rather than the odd case of forgetfulness.
Something else you can look into, is using a prepay credit card. Some providers now offer cards which build up your credit rating. This works by you agreeing to a small loaned amount of around £60, to be preloaded onto the card, which you pay back to the provider with a fee of about £5 per month. Then, providing you have not missed any payments, at the end of a 12 month period, the details are recorded on your credit history.
Failing that, you can look for a regular 'credit-builder' credit card, which is specifically targeted at those looking to improve their credit rating. You may be alarmed to find that the interest rates are around 30%, but there is a practical use for these cards; basically you use them to buy everyday things such as shopping and groceries, then completely pay them off each month with the money you would have used, but shrewdly stored away until the end of the month. This is a great way to build your credit score if you have the discipline, with monthly plus points being added every time you make another successful repayment.Image: © Danielfela | Dreamstime.com