With a new year soon roll in what better time to start rebuilding your credit rating? And what's more with the current crop of products, you can paid for it too.
The onset of the financial crisis back in 2008 saw lenders tighten their belts as record number of people were rejected for loans and credit cards. Thinks have eased a little since but those with previous bad debts, defaults, or CCJs still face an up hill task when it comes to obtaining credit.
It's worth to take a moment to understand how lenders score new applications. Firstly, there is no credit blacklist or nation-wide scoring system. If you do come across sites offering to tell you your credit score for a fee, just ignore it.
Each lender scores you according to their own criteria. This is based on risk, but more importantly on profit. As this calculation varies not only on a lender to lender basis but also on a product basis, it's impossible to say that just because you've been accepted for one type of credit, that you'll be accepted for something else.
If you've recently been rejected for credit then STOP applying now. Each credit search on your file counts against you at your next application. Too many in a short space of time could set you back years. Instead you need to check your credit record and try to find out the reason for rejection.
Get paid to check your credit history
There are three main credit referencing agencies in the UK, and not all lenders use all of them. Under the Consumer Credit Act, you have a right to access your statutory credit report for just £2. Previously this could only be done via post, but more recently all three agencies allow you to do this online. Links are below:
But wait. Rather than paying the agencies, how about getting them to pay to you? Credit referencing agencies offer credit monitoring products to consumers. These can cost up to £180, and is a nice little money earner for the agencies. To temp people in they often offer month-long trials of these services. The trick is to cancel the trial before the month is up.
OK, but how to I get paid?
This is where it gets interesting. The referencing agencies pay cashback websites for referring customers to them. In turn these cashback sites give you some or all of the money they receive, meaning that you can profit from checking your record. Topcashback is one of the best cashback sites at the moment, signing up takes just two minutes, and you'll get £5 for doing so (until 18th December 2016). Once signed up, you just follow the links on Topcashback to Experian (Creditexpert), Equifax, or Call Credit (or all three), to register for your report.
How much will I get?
The amount varies but at the moment Equifax is paying out £6 and Experian £2.50. So you could earn over £16 for checking both. Just don't for get to cancel before the 30 day trial ends.
To cancel call:
Equifax call 0844 335 0550
Experian call 0800 561 0083
Use your Noddle
Call Credit has now introduced a new free credit reporting tool call Noddle. Here you can check your report as often as you like, and the service is free for life. It's important to note though that Call Credit is not used by as many lenders as Equifax or Experian, so still check those. Also be aware that for verification purposes you do still need to use a debit or credit card to register with Noddle.
What to check
Always check your credit record before any major financial application e.g. mortgage, loan, credit card etc.. You're looking for errors or inaccuracies. Is your address history correct? Are all your debts correctly listed? Is your repayment history accurate and up to date? Make sure that your finances aren't incorrectly linked with someone else's.
I've spotted an error now what?
If you do spot an error on your file, simple write to the agency in question and request that your file is updated. You can usually do this online, and the agency should be able to get back to you relatively quickly. In some cases you may need to speak to the original lender.
In the rare case that your change is rejected you are within your rights to add a ‘notice of correction' to the file. This will mean that applications for credit take longer, as a human will have to read the correction, but it may help you get the credit and rate you are looking for. Additionally you can take your case to the Financial Ombudsman.
Improve your credit rating
Get on the electoral role. It's surprising the amount of people who aren't on the electoral role at their current address. Before making any credit application make sure you are listed. You can register at any time at About My Vote, but the database is only updated twice a year (in Autumn and Spring) so time applications carefully.
If you are a foreign national from outside of the EU and ineligible to vote, send proof of address to each of the main credit agencies.
Deal with defaults. Defaults stay on your file for 6 years from the date of issue. If they're legitimate, your only option is either to wait it out, or to contact the lender and negotiate a settlement on the condition that the default is removed. If you feel that the defaults are unfair, then you should complain to the Financial Ombudsman, and issue a notice of correction briefly explaining why. Satisfied defaults will still remain on your credit file until the 6 years are up, but it goes some way to showing new lenders that you take responsibility for your debts.
Start rebuilding your credit rating today
Ironically one of the best ways to start rebuilding your credit rating is to get the right sort of credit card. Getting a credit account and running it perfectly helps to build or remedy your credit history by demonstrating that your are in control of your finances.
Capital One, Barlcaycard, and Aqua all offer credit cards aimed at a rebuilding your ratings. The key to using these cards to is to always pay the balance off in full each month so that there's no interest charges. The interest on these cards is hideous, they should not be used for new borrowing.
The top cards in this market are:
This credit rebuilding card offers 0.5% cash back on spending. That's 50p for ever £100 spent. Accepted applicants will also be given £10 added to their account annually. There's a decent chance of getting this provided you haven't had any CCJs/defaults over the past year, and have some credit history. If you've recently had problems, or are credit building form scratch try one of the other cards below.
It's a credit builder card that offers 0% on all purchases until 31st March 2014. The high representative APR of 34.9% (variable) means that you should not under any circumstances use this card for new borrowing after the 0% expires in March. Instead make sure you pay off the balance in full.
Barclays aim to send the card out within to 7 days from the receiving the application. To qualify, you must be over 18, have lived at your current address for over three months, and earn at least £3,000 a year.
The Aqua Advance card is for those with CCJs or defaults in their credit history, or who have little or no credit history. With an APR of 34.9% always repay in full to avoid paying interest on your balance. The good thing about this card though is that the APR reduces each year until is hits 19.9%.
The Aqua Classic offers no additional perks, but is more likely to accept those with more serious credit histories or no history at all.