How to get a better credit rating

Your credit rating is a very important factor when it comes to borrowing money. It helps determine whether you`re likely to be offered a loan - and if you are accepted, it can also have an impact on the interest rate you`re likely to be offered.

Many people are rightly concerned about their credit rating - especially in the current financial climate. But if your credit rating is less than perfect, how can it be improved?

Get on the electoral roll

To protect against fraud (for your protection as well as theirs), lenders will want you to prove your identity before you borrow money, so you should make sure your name is on the electoral roll. If you`re not sure whether you are on the electoral roll, contact your local council.

Being on the electoral roll is an excellent way of proving that there is someone with your name at the address you have provided, and this can help you get credit.

Stay in the same job (where practical)

A history of steady employment suggests to lenders that you are financially stable, and this can improve your chances of being offered a loan. If you`ve been with the same employer for several years, all the better.

You`ll probably be OK if you`ve changed your job to increase your income - but if your lenders can see that you`ve worked for several different companies in recent years, it could suggest that your finances aren`t stable, and this could hurt your chances of getting credit.

Stay at the same address (again, where practical)

Much in the same way as lenders like to see that you`re in steady employment, staying at the same address for several years will also suggest that you`re financially stable. In general, living at the same address for three years or more should have a beneficial effect on your credit rating.

It probably won`t matter if you`ve moved once in the past few years, but several moves in a short space of time might make lenders cautious.

Don`t apply too many times

Each time you apply for credit, it will be recorded on your credit history, whether it`s a mortgage, an overdraft or any other type of credit. This in itself isn`t a problem, but if you have a number of recent applications on your credit history, lenders may wonder why you`ve applied so many times - and this could make them less likely to lend you money.

If you`re rejected more than once, it`s best to leave it a little while before you apply again. And to minimise your chance of being turned down, be realistic: if you`re applying for credit and you know your credit rating isn`t perfect, you may want to consider talking to a lender who specialises in finding loans for people with less-than-perfect credit ratings.

Use your existing credit (if you can afford to!)

If you have access to a credit card or overdraft facility, using it responsibly is a good way to improve your credit rating - lenders will see you`re used to handling debt, and make your payments reliably. Although it might sound unlikely, being slightly in debt can usually improve your credit rating, as long as you`re keeping up with the repayments. And because they only require small repayments, credit cards can be a good way to prove yourself as a responsible borrower.

Think carefully, though - if you`re struggling with other debts, then using a credit card for your purchases is unlikely to be a good idea. But if your financial situation is good and you`re simply trying to get a better credit rating, spending a small amount on credit each month could help.

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