TIPS FOR A BETTER CREDIT RATING & MANAGING YOUR CREDIT FILE
03:21 pm
1. Register on the electoral roll
This is the foundation to building your credit relationship. For a consumer, this would be the first step to take before approaching any lender for credit. Searching the electoral roll is the first thing a lender would set out to do, when attempting to verify an applicant lives at an address specified. In most cases, banks and other lenders will not look upon any credit application favourably if they cannot link you to a registered address. The primary reason is because a registered address gives the lender confidence that you are rooted in the UK as a resident - if they ever have to come chasing you for their money!
This is also an important process to follow when moving house. If you move house and try to make an application under your new address, it will more than likely be declined until you are recognised on the electoral roll at your new residence.
If you want to check who is listed on the address of your property you need to contact The Electoral Commission here: http://www.electoralcommission.org.uk/your-vote/access.cfm
Please bear in mind that it can take several months to a year before you are officially recognised after submitting your details. So the advice is simple, do it as early as possible.
Also, check who is listed as a resident at your address and remove those old occupants who are still left on the electoral roll for your house - if of course they no longer live their anymore! Not doing this could potentially allow a fraudster to operate using their name under your address and you wouldn’t know about it; as you would usually bin new letters received for a previous occupant or direct them back to the sender.
2. Close unused credit accounts
Many people have old credit card accounts that remain active but unused: Especially with the increasing popularity of balance transfers, that allow you to take advantage of new rates, usually with a new credit card company. But these old accounts remain on your credit file when a lender searches your report.
As lenders are now constantly being pressured to ensure that they are lending responsibly, they can simply take the view that you already have the means to obtain further credit and refuse your application. Even if you only have one regularly used credit card but two old (yet still active) accounts, a lender may decide that you are over subscribed and refuse to give you credit.
Likewise if you are looking to obtain a mortgage, a lender will be able to see that you have several credit facilities available; therefore the means to increase your outgoings in the future, which would impact on your ability to repay the mortgage loan. Again in this instance, the lender may decide to decline your application or limit your borrowing potential.
3. Get a quote not an application
What is an application form nowadays? Just last week I was approached by a nice lady in a shopping centre who was asking about my need for a new credit card. I politely responded that I do not require another card. She asked then if I would do her a favour and just simply fill in a few details as she would earn a commission. After inspecting a form she presented to me, I declined as this ‘simple form’ would have led to the beginning of a credit application.
A credit application puts a direct search or imprint on your credit file and too many of these in a short space of time (up to 6 months) will count against you. If you find yourself looking for a mortgage or loan, or any lending really, the best thing to do is approach a company and be sure to ask them not to run any searches on your credit file; but instead to give you a quote. Many companies will insist that they have to run a credit search in order to give you a quote. If this happens, do not proceed and call someone else. The best thing to do is to speak to one of our brokers who can search the market without leaving an imprint on your file (for mortgages and loans). Going for a quote will enable you to get an idea of what credit is available to you, including different rates of interest and a credit limits, based on some basic information that you have given. If you are then happy with the quote, you can turn this into a full application which will leave an imprint.
The problem with an application rather than a quote is that often when we are trying to buy a house or secure a loan, there are many stages of an application process to overcome. Often, a company will credit score you first at the very beginning (leaving an imprint on your file), later on you will find that you do not fulfil some other criteria and therefore your application falls through. For example, enquiries into the property that you are attempting to purchase reveal information that the lender is not happy with and therefore the application cannot proceed.
This means that you will have to approach another lender if you still wish to buy the house and when they search your file they will see that you have made another application just recently; which may affect your final decision or just the rate of interest you receive. Don’t forget that most of the credit scoring processes are automated, the computer doesn’t know whether that previous application has succeeded or not but it can count against you.
I had a friend who wanted to invest in a buy-to-let property. He had an offer accepted and applied for a very favourable mortgage only for the vendor to pull out shortly after. This occurred four times on four different properties and by the fifth time; no lender would consider his case and he was actually considered to be a ‘sub prime’ consumer, due the implications of credit scoring and credit file searches over a three months period. Even though he started with an impeccable credit rating, he now has to wait six months for everything to settle down!
Of course, you won't always be able to protect yourself from these occurrences. The point is that wherever possible; you need to make sure that an application for credit is only begun once you can be as certain as possible that you have eliminated as many potential obstacles. Do this by ensuring you are fully aware of any exclusions or restrictions that a lender may have, with regard to loans and mortgage applications.
4. Don’t miss any payments
This appears to be the obvious tip but many people just don’t realise how much of an impact a few days on a missed payment or underpayment can have.
I used to pay for my credit card monthly repayments by standing order. I set the standing order at £50 per month and the repayment due each month was £30. This was fine for a while and I left it – knowing that I was covering the minimum amount each month and paying extra, to hopefully reduce those monthly payments and shift more capital than interest. However, after a Christmas shopping spree, the total amount owed on the card hit near my maximum limit and therefore the monthly minimum repayment level rose over the threshold that I had set at the bank. There was a shortfall of around £3 on the monthly payment which I did not catch until the statement the following month. You have to remember that a standing order is a static payment method.
Checking my file that very same month, I had an alert on my credit report to state that I had ‘missed one payment’. Although this was not strictly true, it shows just how something so small can count against your file. Make sure that every month you are in contact with all your creditors, as I stress again that most processes are computerised. If you genuinely miss a payment, you may be at risk of the lender’s system automatically noting a missed payment on your credit file. The top tip? Try to arrange all of your credit repayments via direct debit, so that not only do they reach the lender by the required time, that they are also the current repayment amount required. I learned this lesson the hard way!
5. Check your credit report – Sign up to monitor your report
This is the easiest way to find out everything you need to know about the data stored on you and the best course of action you can take going forward. Ensure that you are fully aware of the constantly changing credit information; that is made available to the companies you have an existing relationship with and those companies in the future that you may wish to develop a relationship with. There are three main credit referencing agencies in the UK. They are:
www.experian.co.uk
www.equifax.co.uk
www.callcredit.co.uk
All three offer the consumer the ability to monitor their credit reports and make changes if required, due to incorrect information. Here you can place ‘notices of correction’ to explain any arrears and show the lenders that you are fully in control of your finances. The best company to use in my opinion due to ease of use, available facilities and economies of scale is Experian’s Credit Expert service. If you click the link here you will be able to access your report for free for up to 30 days without charge:
Experian Credit Expert
The majority of lenders in the UK use Experian as their main credit provider for checking up on you in a credit scoring application.
6. Get your partner to check their report
If you are financially connected to a partner through the bank or if you have a joint mortgage, you will most often be seen by lenders as a ‘financial unit’. Even so, one partner will not be able to apply and view the credit file of another. It is therefore imperative in this situation that you get your partner to check their credit report as well as yourself. Where your file may not reveal any problems, their file may indicate something that will have an impact on any joint applications and indeed any single application that you intend to make in the future.
7. Password protect your credit file from fraudsters
There is now a new way to combat ID fraud and safeguard your personal information. The credit reference agencies now allow you to place a password on your credit file, so that every time you apply for credit you will be asked to confirm this password. This will stop anyone who has managed to obtain your personal information, through phishing or data theft, from falsely trying to obtain credit or goods in your name. Only you will know the password and there is no way to proceed with any credit application unless this password is used.
Once again to view your credit report absolutely free for 30 days and to protect your credit file with a password please visit Experian Credit Expert
By : Bright Buy Admin | Category: Buy To Let Mortgages | Comments [0]
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