It might be the last thing on your mind at the moment, but at some point in your future you will need to get a loan or a credit card or you may want a mortgage. Your credit score is one of the factors which is taken into account by your bank or mortgage company when they decide how much they will lend you and what interest rate you will pay. Obviously, the better your score, the lower the cost of lending will be.
So how do you get a good credit rating and make sure it stays that way? First you need to understand the types of things lenders will be looking for when they decide whether you are a good risk or not. They will look at your credit report to find out the following:
* If your name is on the electoral role alongside your address. This will also show the other people you live with.
* If you have had any county court judgments for defaulted loans.
* Other lenders who you have dealt with and how those loans were paid, plus any other people who you have a financial association with.
* If any fraud has occurred in your name.
* Any history you have built up with your bank, utility company and phone provider.
Please note: Your student loan details will not be shown on your credit report.
It is important to start building up a lending profile as soon as you can. This means making sure you pay off your overdraft and credit cards as quickly as possible. This all looks good on your credit file. It may seem odd, but having no credit at all is actually a bad thing when it comes to your credit rating. You need to show you are capable of paying off your debts.
It is essential that you check your credit file from time to time to make sure that nothing has happened which you are not aware of. This could be the case if your name and address has been used fraudulently to obtain credit. You can get your credit report from a number of online companies for as little as £2. This is money well spent.
If you do find an error, you need to approach the company involved to ask for it to be removed. Be prepared for a fight though, as you will need to prove that it was not you who took out the credit.
Keeping your credit rating high
* Get on the electoral role and always inform them when you move house
* Try not to allow too many credit searches in a short space of time
* Fix any previous problems and take the time to build up your rating before applying for new credit
* Always make your payments on time
* Be careful about who you are financially linked to. This can include partners and house-mates with whom you share credit cards or bank accounts.
* Try not to move around too much. The longer you live in one place the more stable you will appear.
This may all seem like common sense, but it is all too easy to allow the odd late credit card payment to slip in. This is a very slippery slope and in the eyes of a lender, you need to be financially without reproach. Take you finances seriously and your lender should take you seriously as well.