How to Build a Credit Rating

Applying for credit is something most people need to do in their lifetime. There are several ways in which you can improve your credit rating which makes it more likely you will be accepted for credit.

The key to being approved for credit lies in how healthy your credit rating is and you can find this out simply by ordering a credit report. A credit report contains details of any credit accounts you have from loans and cards to utilities and mail order catalogues.

Lenders check your credit report when you apply for credit and use the findings to decide whether or not they will lend to you. A trail of bad debts usually results in credit being refused whereas a history of making repayments on time and in full should count in your favour.

Taking steps to improve your credit rating places you in a stronger position to borrow in the future. It is therefore important to understand how your credit rating works, what factors control it and how you can improve so your financial future looks even rosier.

The first step in the process should be to obtain a recent copy of your credit report as this will tell you what your current credit rating is. You can purchase a copy of your credit report for a small fee from a credit reference agency. The three main agencies in the United Kingdom are Experian, Equifax and Call Credit.

Once you work out where your credit rating is then you can plan where you need it to be and how you are going to get it there.

Lenders want to be sure you can repay what you borrow comfortably and on time, so they look at your application to gauge if you earn enough and check your credit history to see what you have already borrowed and how you are managing the repayments.

Paying all bills in full and on time is a surefire way to build and improve your credit rating and encourage lenders to borrow to you.

If you have been refused credit then do not continue to repeatedly apply with different lenders as this will definitely drag your rating down. You can enquire as to the reasons behind the decision to refuse you credit and this can help you to work out what to do about it.

An easy way to build your rating is by simply ensuring you are on the electoral roll. Lenders and credit reference agencies want to know where you live, so make sure you are listed. If in doubt contact your local council to double check all details are correct.

Successful credit building may depend on borrowing money to build more credit. If you have never had credit before then you will be invisible to credit agencies and your credit rating will be non-existent.

It could be worthwhile taking out a credit card but make sure you use the card wisely, without incurring charges or penalties.