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Feeling the pinch after Christmas? Be sure to avoid pay-day loans by improving your credit rating...

There are a number of things that can affect your credit rating, ranging from your existing borrowing arrangements to your payment history. There are some simple things you can do to try to improve your rating.

If you are in a position in which you need to borrow money, think carefully about the type of loan that may suit you and plan carefully, avoiding making a bad decision in a rush. Before you think about choosing a so-called payday loan, visit the Money Advice Service to look at the potential risks and examine alternative options.

Your credit rating is important as it affects your ability to borrow, get a bank account or mortgage. You may not even know you have a bad rating, but if you have a history of missing payments or have lots of different borrowings, it may have affected your status.

There are three possible agencies you could use to check your credit rating: Experian, Equifax or CallCredit.

Then, take a few simple steps to boost your rating:

1)      Avoid applying for more credit

2)      Get on the electoral register – being on the list enables credit companies to verify you much more easily

3)      Cancel unused credit cards – multiple cards may seem like a clever way to spread payments, but they could adversely affect your rating

4)      The Money Advice Service recommends trying to negotiate with lenders if you’ve defaulted on payments in the past. If you can pay off some or all of the debt, they may be willing to remove the default from your report

5)      Make sure all your debts are registered to your current address

Borrowing does not always give you a bad credit rating. Being a responsible customer and paying back loans promptly and regularly can actually positively impact your credit score. Other things that lenders like include fixed rather than mobile phone lines; long-term employment history; history of living in one place; owning rather than renting a property; and a long-term record with the same bank.

If you are finding it hard to make ends meet, speak to your lenders and see if you can renegotiate your payments before you default. If you don’t know what to do, speak to a free debt charity such as StepChange who can advise you and may even be able to negotiate with your lenders on your behalf to get you back on track.




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Top tips to improve your credit rating
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