Fix Your Bad Credit Rating

  • Why your rating is bad
  • What Credit Agencies know
  • What to check first
  • How to make corrections
  • How to dilute history
  • A route to good credit
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Repair Your Bad Credit Score

Your credit file is your passport to obtaining credit in the future. It records such things as:

  • how well you manage current credit agreements (e.g. loans & credit cards)
  • whether you have made applications for further credit, and
  • if you have been late repaying or defaulted on any debt.

As it is so central to how you manage your financial life it’s essential you know how to manage your credit file. It really is possible to repair and improve a bad credit score.

 

A Step by Step Plan

A bad credit rating is determined by what is in your credit files:

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How to Repair Your Credit Score

A higher credit score gives you a higher chance of being accepted for credit. Your current score reflects the information gathered by credit reference agencies about the way you have managed credit in the past. These agencies also have other information that can affect your rating, and sometimes the information they hold is incorrect. Here’s a step-by-step plan to help you take control of and improve your credit status, improve your chances of getting credit, and get it at lower rates:

Understand Your Credit Files

1: Understand Your Credit File

Once you know what is and is not stored in your credit file you'll feel more able to influence your rating.

Check what's in your file

2: Check What's in Your File

Use a credit monitoring service to get the details of what is currently in your credit file.

Correct Any Errors

3: Correct Any Errors

If you find errors in your credit file you are within your rights to request their correction. See items 23 to 29 in our guide.

Improve Your Repayment Behaviour

4: Improve Repayment Behaviour

Having new credit and repaying it on time and in full will add good news to your file that will dilute historic bad news and so improve your rating.

Why You Have a Bad Credit Score

When you apply for credit the lender checks your file and turns it into a score – if the score is too low they won’t lend to you or give you credit. If you have been rejected then this is because you have a bad credit history.

Your credit file records the way you manage your credit activity and information flows into your file continuously. It will come from credit card companies, loan companies, mobile phone companies, utility companies, etc. But it could also contain errors, or it might contain spurious data that could damage your financial reputation if you have suffered identity theft.

 

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What’s on Your Credit File?

As there is no automatic right to credit it’s important to ensure that what is on your credit file is correct. You can request incorrect information to be deleted and this will help your credit rating. With the rise of identity theft, there is also a risk that people will try to obtain credit in your name. This could also be recorded on your credit file potentially damaging your legitimate right to getting credit in the future.

So, do you know what is in your credit file? Do you know why you are being refused credit? As it is so important to know your credit status you should get a copy of your credit file.

 

Check your Credit File if you…

  • are applying for a financial product – loans, mortgages, credit cards, interest-free credit, etc.
  • have applied for credit and have been refused – why were you refused?
  • are concerned about your credit history
  • want to check that the information held about you is correct
  • want to protect yourself from identity theft.

The Home Office actually recommends getting your credit report on a regular basis to help reduce the risk of identity theft.

So, don’t let credit be denied to you because the wrong information is held about you, and don’t let yourself become the victim of identity theft. Check your credit file today.

 

 

Correcting your Credit File

If any of the information held about you is incorrect or should have been deleted you can request its removal – this should help your credit status.

The credit reference agencies generally hold information on your file for at least 6 years and it includes:

  • Settled accounts
  • Credit accounts “in default” – deleted 6 years after the date of default
  • Bankruptcy orders – deleted 6 years after the date of the bankruptcy order
  • Individual Voluntary Arrangements (IVAs) – deleted 6 years from the date the IVA was set up
  • County Court Judgements (CCJs) – deleted 6 years after the date of the judgement
  • Magistrate court fines

 

Actions to Fix a Bad Credit Score

 

 

More about Bad Credit Rating

The 3 Most Important Credit Bureaus: UK & USA

Equifax, Experian & TransUnion logos
The three global credit reference agencies

Credit reference agencies (also called credit bureau) capture the credit behaviour of all of us who use credit. You don’t need to be borrowing from banks for there to be a credit file about you. Merely starting a mobile phone contract or paying for your utilities in arrears means you are using credit.

As your creditworthiness is vital in today’s economy it pays to understand what these companies know about you. And it pays to know how to ensure that information is correct.

In the meantime, here are the contact details for key credit bureaus should you need to contact them:

Experian

United Kingdom

Address: Customer Support Centre, Experian Ltd, PO Box 9000, Nottingham, NG80 7WF

Tel: 0800 013 8888

Website: experian.co.uk

Get your £2 statutory report

United States

Address: PO Box 4500, Allen, TX 75013

Tel: 479 343 6239

Website: experian.com

Get your free credit report

Equifax

United Kingdom

Address: Equifax Ltd, Customer Service Centre, PO Box 10036, Leicester, LE3 4FS

Tel: 0800 014 2955

Website: equifax.co.uk

Get your £2 statutory report

United States

Address: PO Box 740241, Atlanta, GA 30374-0241

Tel: 866 349 5191

Website: equifax.com

Get your free credit report

TransUnion

United Kingdom

Address: Customer Relations, TransUnion Information Group, One Park Lane, Leeds, LS3 1EP

Tel: 0330 024 7574

Website: transunion.co.uk

Get your £2 statutory report

United States

Address: TransUnion, PO Box 160, Woodlyn, PA 19094

Tel: 800 813 5604

Website: transunion.com

Get your free credit report

 

Our Money & Credit Guides

If you’re uncertain which type of credit might suit you or you have a money problem then one of our guides may help you. We summarise each type of loan and their pros and cons and address issues regarding debt and credit ratings.

More about Managing your Credit File:

For the detail of managing your credit file read “101 Ways to Improve Your Credit Rating“.

What information is in my credit file?

The main credit reference agencies (see “Who holds credit files about me” below) gather four main different types of data about you:

  • Electoral roll information – about your UK residency, including your address
  • Court records – such as whether you have been subject to CCJs (county court judgements), IVAs, bankruptcies and other debt orders
  • Searches – by lenders when you have applied for credit (inc. any company giving you credit for a product or service you might purchase) & utility companies
  • Account data – this covers your account behaviour. Primarily this means how well you meet repayment deadlines.
How do I improve my credit file & credit rating?

These are the simple rules that, over time, will help you clean up your credit file and so improve your credit rating. Keep in mind that this is about improving the data held on your files and this in turn will be used by companies to judge your credit score:

  • pay your bills on time
  • don’t miss payments or default on debt
  • pay off your credit card bill in full each month
  • don’t change address or job too frequently
  • honour repayment schedules agreed for previously defaulted debt

…and don’t forget to check that what is on your credit file is correct.

How do I improve my credit score?

Fact – you don’t have just a single credit score. Credit scoring is the process that lenders go through to judge the risk of lending to you. They will look at your credit file and other information to generate the score. Since not all lenders are after the same type of customers different lenders could score you quite differently.

But, taking steps to improve and correct what is on your credit file will, everything else being equal, help to raise your credit scores when you look for loans and other credit.

If you have credit problems and don’t want to be credit scored then a guarantor loan may be an option for you.

How can I avoid identity theft?

Fraud linked to identity theft is a growing problem, as more and more data is handled on line and is held by organisations. CIFAS, the UK body responsible for trying to help prevent fraud, say that around 120,000 cases of identity fraud are reported each year at a cost of over £3.0bn. CIFAS report that:

  • it can take up to 48 hours of work for a typical victim to sort out their lives and clear their name
  • in a “total hijack” of someone’s identity (perhaps involving up to 30 organisations) it could take over 200 hours to get their lives back in order
  • a victim’s credit status may also suffer considerable damage

How to minimise the risk of your identity being stolen

  • don’t be complacent online:
  • use strong passwords that are unique to each service you use.
  • don’t share your passwords.
  • be careful what you disclose about yourself on social media
  • be very cautious about clicking links in emails – hover your mouse on the link to see where it is really going to send you
  • shred financial documents before disposing of them
Do credit reference agencies have blacklists?

This is a myth. The UK’s Information Commissioner’s Office (the body that monitors data protection) has confirmed that credit reference agencies do not hold blacklists of borrowers, and they do not tell lenders if they should offer you credit or not. This decision is for the lenders to make themselves.

How do I get my £2 statutory credit report?

The 3 UK credit reference agencies are obliged to provide you with the credit data they hold about you. You can obtain it from each agency for £2 (i.e. £6 in total). This fee is charged each time you make a data request, and the fee is non-refundable. You can order the reports via their websites or via the post. You should receive the information with 7 working days.

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Monthly repayments £144.32
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This tool is for guidance ONLY. It is designed to help you estimate loan repayments. It uses the representative APR of the product. Lenders have a duty to conduct affordability checks when you apply for a loan.

Representative example: Borrow £9,000 over 48 months. Repay £246.84 per month. Total charge for credit will be £2,848.42. Total amount repayable is £11,848.42. Representative APR 14.2% (vrbl)

This tool is for guidance ONLY. It is designed to help you estimate loan repayments. It uses the representative APR of each product. Lenders have a duty to conduct affordability checks when you apply for a loan.

Representative example: Borrow £9,000 over 48 months. Repay £246.84 per month. Total charge for credit will be £2,848.42. Total amount repayable is £11,848.42. Representative APR 14.2% (vrbl)

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Written/Reviewed by: Amanda Gillam

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