Finance Roll

People looking to improve their credit rating should first of all familiarise themselves with their credit file. Credit reference agencies such as Experian, Equifax and CallCredit hold information about every financially active person in the UK, including their financial and credit history. Most industry codes encourage companies to disclose the reasons for turning down requests for credit. Therefore, by reading your file you will understand which part of your credit history is letting you down and how you can remedy it.

The first step to improving your credit score is to ensure that your name is on the electoral roll. Maintaining a presence on the electoral roll is essential as banks and building societies need to know all the information about you is up to date before you can open an account. Additionally, credit reference agencies keep their information updated by checking the electoral roll every month so adding your name to the list will instantly help your credit rating.

Perhaps the most important factor in improving your credit score is proving to lenders that you can manage credit responsibly. Too much credit on your file will put lenders off the idea of giving you anymore whereas having too little credit will result in companies seeing you as unprofitable. Regular repayments on a loan or clearing the monthly balance on a credit card are excellent ways of demonstrating to lenders that you can cope with credit and are not a liability.

It is also essential to keep the credit agencies updated of any changes to your financial circumstances. If you apply for a joint bank account, loan or mortgage with a partner of friend, you are tagged to that person, meaning their credit rating can also affect yours. This tag remains even if the joint account no longer exists so if you spot an ex-partner's name while reviewing your credit report, have it removed immediately otherwise you could find yourself in further trouble when trying to secure a mortgage, car credit, personal loan or mobile phone contract.

It is also advantageous to avoid being repeatedly refused credit by companies. A "footprint" is left on your credit file every time it's viewed by a company and, while this means that you know who's checking your file it also means that the bank has an idea of how often you are applying for credit. Depending on how many "footprints" have been left, this can cause alarm bells to start ringing.

After being denied a credit card or loan, contact the lender who turned you down and try to find out the specific reason why. If there is a particular part of your credit file that deterred the lender, it's worthwhile spending time trying to repair that part of your file rather than instantly applying to a different company for credit. If you desperately need credit, try a lender who specialises in loans for people with less than perfect credit histories.

Having the patience, discipline and know-how to improve your credit rating could not only result in lenders offering you better interest rates but also help you achieve financial peace of mind and help you live more comfortably in the future.