Check & repair a credit rating in 30 days
Better credit can help when applying for a mortgage, a loan, even a mobile phone or a lower interest rate.
We don't have 'number' credit ratings in the UK: each lender weighs the product an individuals is applying for - and, increasingly, even the products they already have - against the information they happen to have in order to reach a decision.
That makes knowing how far a rating has improved complicated.
Luckily, though, the actual improving part is pretty simple. Here's our plan to do just that in 30 days: it's like the Special K diet for finances.
Order a credit report(s) | Get on the electoral roll
Let's start small in week one. One of the easiest things anyone can do to repair their credit rating is to get on to the electoral roll.
When someone is registered to vote it gives lenders a really simple way to see that their name and address check out, it doesn't take long and it's free.
Each local authority has a different procedure, go to Direct Gov's electoral roll site to register now.
Anyone unsure about whether they're registered or not, can find this out via their local authority and About My Vote can direct them to the right person to ask.
Note that for anyone wanting to improve their credit rating, it helps to be consistent in applications (see week 4 for more on this) so those who write their address in a few different ways should try to stick to the format listed on the electoral roll in future.
Next, it's credit report ordering time.
Not the non-existent 'credit rating black list' but just the information held by major reference agencies that lenders might refer to.
Many reference agencies make these reports available for free online (see here for more details) with a 30 day trial of their service. After 30 days anyone wishing to keep tabs on their report will need to make a regular payment. Alternatively those who just want the trial will need to cancel the service before the 30 days are up. More on how this works in our full review.
It's now even possible to get paid for accessing credit reports. Anyone who likes the sound of this simply needs to sign up to Experian or Equifax, the two services that offer this option, via a cashback website, like Topcashback or Quidco. Again though, to avoid monthly fees subscribers will need to remember to cancel before the trial period ends.
If that sounds like too much effort, and it does to us, it might be a better option to order a statutory credit report which costs £2. This can be ordered from any of the 3 major agencies - Equifax, Experian and CallCredit - and the full details are in that free report article linked to above.
Subscribers can see these reports online but can also choose to receive them by post so we'll return to this in week 3.
Automate finances | Ditch unused lines of credit
In the long term, using financial products consistently and responsibly will help an individual to improve their credit rating.
That's why it's a good idea to automate as many payments as possible to avoid obvious 'black marks' like missed credit card payments. The aim is to make personal finances well-oiled machines that pretty much run by themselves, leaving us to do something more fun with our time.
So: got a credit card? Set up a direct debit to meet the minimum repayment or, even better, more than the minimum.
Dip into an unplanned overdraft now and then? Request an overdraft to provide a buffer or, if getting a bad deal at present, switch current accounts altogether.
Another bit of future-proofing to repair a credit rating is getting rid of credit products that are no longer being used.
We have a full guide to these and other time and money saving measures here.
Having a rarely touched bank account won't hurt but holding a lot of credit cards, even if they are never or rarely used, makes a person more risky because it means they could borrow big.
To cancel cards call the provider, it's not enough to just cut them up Bridget Jones-style.
Review credit reports | Debt busting
By now those following this guide should have at least one credit report and should therefore be able to see, more specifically, how to repair their credit rating.
Go through with a fine tooth comb: look for inaccuracies in personal details like the wrong date a previous address was vacated, or worse, the wrong address and financial inaccuracies like a wrongly listed missed repayment.
It's worth saying however that research from Equifax released in June 2011, revealed that just 4% of their customers actually ever queried a credit report, and just 0.01% applied for it to be corrected.
In other words, there is a perhaps a line of usefulness in fixing minor details.
Be sure to look for the underused lines of credit we talked about above and any financial links that may harm cause harm.
Note that it's only when individuals have a mortgage or a joint bank account together that lenders regard them as 'financially linked'.
Simply living in the same house as someone with a poor credit rating isn't enough to do any damage. In fact, even being married or in a civil partnership to someone with a bad credit history might not cause any harm.
Any inaccuracies must be reported to the credit reference agency, they can update it or wipe some things, like a default on a debt, altogether. More on this here.
If it's a problem with a debt that's still open this can also be rectified by contacting the lender.
As a last resort, an explanation of a complex problem can be recorded on a report (known as a 'note of correction') and can help improve a credit rating by straightening out an unusual blip.
Defaults cannot be hidden or erased, such as County Court Judgements (CCJs) and bankruptcies, but they will be wiped after six years.
Finally, and importantly, credit reports list any outstanding debts.
If the potential for debt (those old credit cards) makes lenders jumpy imagine what the real thing does. That's not to say that borrowers have bad credit ratings but the best minimise debt as much as possible.
It's also a good idea to pay off debts full stop.
Find more information on dealing with all kinds of debt in this full guide.
Credit card debt can be particularly pernicious. Deals offering introductory rates on existing debts moved to the card could be useful in that case - compare deals here and find out more about dealing with multiple card debts here.
Keep those good habits | Consider 'credit building' cards
Last week and time to look to the future.
The best way to truly repair a credit rating is to not damage it in the future. That means staying stable and consistent (we know, we know, boring) as much as possible.
We've already gone part of the way on this in week two by automating as many payments as possible, now it's time to get into a few more good habits.
Anyone applying for a new credit card or loan should do thorough research - which will be a lot easier now they know where they stand with their credit rating - and choose the best time to make a new application, like when they haven't just made a big change like a new address or a new job.
Research and timing reduced the chance of rejection.
Rejection hurts on its own but it's also best avoided because lenders can see if there's been a recent search on a credit report and that hurts an overall score. This won't matter for applicants who get the deal they want t but it will if they're forced to apply again elsewhere.
To avoid knock backs, applications for any products that require credit report searches should be spaced out by at least 3 months to offer the best possible chance of success - even if the products being applied for seem completely unrelated to each other.
Find out more about this here.
Remember, getting a new insurance policy or moving to a new mobile phone or broadband contract can mean a search of a credit file.
Finally, consider products aimed to help rebuild or improve a credit rating.
Poor score credit cards (see the table) can help to improve and strengthen a damaged credit history, as well as help to build a new history as well, or for those not ready to make a credit card application, the Cashplus prepaid card offers another way to add positive marks to credit files, read more on this here.