May 10, 2005

Getting and receiving credit will mostly come down to one thing, when you apply for it, your “Credit Rating”. So if you are experiencing problems getting your hands on a credit card or loan, then you will no doubt have a low credit rating, so repairing it to help you get the credit that you need, should be high on the agenda.

The reasons for having a low or bad credit rating, can be put down to defaulting on past debts, bankruptcy or if you have any court judgements against your name, all of these contribute to the stain on your credit score.

This does not mean that you will never get any type of credit when your are in this position, as there are always some companies who are willing to take the risk with people who have a low or bad credit rating, though the lenders will charge in the upper levels of APR, due to the higher risks involved.

What happens when I apply for a credit card?

So how does the credit company that you have applied to, obtain your credit rating? The answer to that, is that most of the lenders out there will seek the information that they require on you from the top two credit agencies, namely Equifax and Experian. Both of these will have compiled all of your credit history from all the companies that you have borrowed from before and if you were regular payer of your debts, they will also check the Electoral Role, check for any county court judgements.

Where does this information go?

All this information is then given to the lender who will then add what ever rules that they have in place of they’re own, to decide if the person that has made the application for credit, will receive it. What you have to remember it is at the discretion of the lender to accept your application and it is not the credit agencies that refuse you the credit you want.

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Once all the relevant data is compiled and it has been decided that you have been refused, and then by law the credit lender who has refused you has a duty to tell you why. If this is the case you can ask for a review of the application, if credit scoring was used, this all comes under the umbrella of the Data Protection Act.

Can I appeal?

By asking for a review it will give you the chance to see where you can improve upon your credit rating, ultimately it gives you the chance to see if there are any black marks against your name that shouldn’t be there, so that you can have them altered, as these credit agencies are not infallible.

What can I do to improve my credit rating?

The next step if your credit rating is low, is to try and repair it to a standard that will make it easier to be accepted for credit. As all is not lost, though it will take a while, especially if you have a bankruptcy against you, this will be a noose around your neck for 6 years, but climbing back up the credit rating ladder can be done with patience and work.

To start with and something that is essential to your cause, is to pay all your lenders they’re money on time, if you are in a position that the payment cannot be made, inform your creditor of the situation and make sure that a payment is forthcoming the following month. Another tip is to purchase a copy of your credit history from the credit agencies, as this will give you the chance to change any irregularities that may help your cause and it means that you can see if a debt that was paid towards a county court judgement, is noted on the file.

If you would like a copy, it will usually cost you £2 to have it posted to you and it could work out to be money well spent.

If you come across anything that should not be there or you have a valid enough reason for why some of the debts were not paid on time, then by writing a “Notice of Correction” on to the report that you have received and sending it back may also help your fight for a better credit scoring. This can also be done if you have had a bankruptcy hanging over you that has been annulled, thus adding a copy of the annulment or an order of discharge to the report and getting it off as quickly as possible to the credit agencies.

While all this is being done, there are ways to be increasing your credit rating while you are making purchases, though don’t fall into the trap of just adding to your woes, you will have to be disciplined.

Store cards hold a very high APR, but by making purchases at a level that you can afford and paying them back on time and having them clear of interest will soon have you credit rating creeping back up and by opening up a few cards will only accelerate the process. But I will say again make sure you can afford to and you keep on top of it at all times.

Something else you would be wise and try and avoid doing, is to apply time and again if you have been refused credit, as this will only lead to your score getting worse than it all ready was.

So it is imperative that you only apply to or for loans that you fit the profile of the type of customer that the lender is after.

A better scoring will not happen over night it will have to be worked upon, so by following some of the tips above and prove that you are a reliable borrower, will only help you get there quicker.

Another is if you can find a good friend or trusted member of the family, who will go guarantor for you when applying for a loan or credit card, because the main name on the debt will be yours and this will be seen by any potential lenders, that you can be seen as a person that they will be willing to give credit too.

If you require a credit report from credit agencies then below is the telephone numbers of both of the ones mentioned in this article. GOOD LUCK!

EQUIFAX (08700 100 583)
EXPERIAN (0870 241 6212)