Many of us have the odd financial ‘blip’ when things go wrong. We might, for example, miss a credit card payment, get into arrears with our mortgage payments or pay our council tax bill late. Although most of us are able to sort out these problems and to get back on the financial straight and narrow this doesn’t mean that these problems go away -- they will generally end up being recorded on your credit history where they can cause you no end of future problems.
Your credit history is used by financial companies when you apply for their products. So, for example, if you apply for a loan, a mortgage, a new mobile contract or a credit card then the company will usually credit check you. They do this to make sure that they only offer credit to people who will not be a ‘risk’. If you have these problems on your credit history then you simply look like a risk and you may see your applications being rejected or you may be charged significantly higher interest rates.
But, these issues won’t stay on your credit history forever and there are measures that you can take to ‘clean up’ your record whilst you wait for them to come to an end. In basic terms this means that you need to work hard to avoid any other incidents being placed on your record and to show that you are actually now a good risk and are acting responsibly where your finances are concerned. Other measures that you can take include:
Updating your details Do make sure that your credit record contains up to date information about you including a land-line phone number. Make sure that you are registered on the electoral roll as this is one of the measures of ‘good risk’ that lenders look at. If your details are incorrect in any way then contact the relevant credit company to have them changed.
Meet your commitments During this period it is vital to keep a squeaky clean payment history. So, set up direct debits to pay off your credit bills if you keep forgetting to pay them. Paying on time, every time will soon help you build a better risk picture for a new lender.
Get rid of old products If you have a purse or wallet full of credit cards that you no longer use then close down the accounts. It doesn’t look good to have too many financial commitments in your name.
Avoid applying for new credit lines Every time you make an application for a credit product it will show up on your credit history. The vicious circle here is that an application from someone with a bad credit record may be turned down and this rejection will show up as well. Lenders trust each other and a rejection from one could well end up as a rejection from another. Talk to lenders first and explain your situation before you make any formal application to see if you are likely to be rejected. You should also avoid making a lot of applications in a short period of time as this makes you look desperate.
Taking responsibility for your own credit history can go a long way to repairing the damage that was originally caused. If you can simply show a lender that you are working hard to keep on the straight and narrow then you will improve your chances of getting approval from them instead of rejections. So, if you haven’t already done so, sign up to the major credit history companies (Experian, Equifax and Call Credit) to take a look at your record and to see where to make a start.