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2.
Fix the problem now
Although it isn’t
simple to repair your credit rating (improve your credit rating early –
this is key) it is possible. You need to become a borrower again to gain
some trust. There are companies out there who will lend to high-risk
individuals.
Moneysupermarket.com will conduct what they call a “smart search”
where borrowers can search for the most appropriate deals available to
them according to their creditworthiness. Individuals with a bad credit
history will pay high rates for an unsecured personal loan however. These
are often more than double or even triple the price of the mainstream
deals.
3. Use caution when
considering “credit repair”
Many so called credit repair firms claim to be able to fix your credit
file and clean up your credit history, particularly if you have had bad
debt in the past. These companies can offer shoddy advice (often available
straight off the internet free of charge) and charge a high fee for their
service! Specialist information can be easily obtained from credit
reference agencies or alternatively from debt counselling services.
4. Some borrowing now
helps
If you are unknown to the big credit agencies mentioned above, your
credit record or credit history will be less than adequate. Not because
you are a bad borrower or have bad debt, but because you have not proven
yourself to the financial world. It is often sensible (and very easy) to
take out a credit card, even if you don’t intend to use it. Always use the
card sensibly, do not incur fees, charges or penalties, and the banks will
eventually be enlightened as to your creditworthiness.
5. Be creative with
borrowing to build credit rating
As per the above, store cards act in a very similar way, by providing
you with access to credit, exposing you to borrowing and allowing you to
prove to the financial institutions that you can be trusted with their
money; you are a good borrower and your credit history proves this!
Although the interest rates on these cards are usually huge (although may
include a 0% introductory offer – be wary of these) they are convenient
and useful as long as you pay them off quickly each month and avoid all
fees and charges (which will give you a poor credit rating, of course!)
6. Electoral roll
This is the most common area where lenders find themselves unable to
lend to a borrower, despite them having an otherwise good credit
rating/history. Lenders and credit reference agencies always want to know
exactly where you live in the world – especially if they need to get hold
of you in relation to all that money they lent you! Make sure you
register your on the council’s electoral roll. This is really simple, and
involves the completion of a simple form – this can even be printed from
most local authority websites, and the whole process should take around a
week.
7. Mobile phones
Mobile phones are a financial contract between you and the service
provider. They are agreeing to allow you to run up a bill, and you are
promising them that you will pay them when they request you to (typically
at the end of the month). Do not underestimate the significance of this.
There is a lot of money at stake here (£35 per month x 12 months!) so this
is considered no differently to any other loan or credit you are given.
Don’t make late payments as this will have a negative impact on your
credit report.
8. County court judgments
These can be significantly damaging to your attractiveness as a
borrower. If you have a CCJ, make sure it is paid off immediately (ahead
of anything else) and then ensure you do your own checking at the county
court to ensure your name is in the clear.
9. Mortgages
Mortgages are available to everyone, even if you have a bad credit
history, but it’s likely that you will pay a higher rate. Make sure you
consider moving a high rate mortgage after you have paid steadily and
efficiently after a couple of years – you should then be eligible for a
better interest rate as you have proven you are a trusted borrower. Don’t
forget to do this, as you may end up paying a premium despite having
significantly repaired your credit rating/credit status.
10. Get professional help
There are a number of agencies out there who are able to help you.
Give them a call if you get into real trouble. Two of the biggest consumer
credit advice lines are:
National Debtline:
www.nationaldebtline.co.uk or 0808 8084000
Consumer Credit Counselling Service:
www.cccs.co.uk or 0800 1381111
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