If you have ever defaulted on loan or credit card repayments, declared bankruptcy or had your identity stolen you may struggle to obtain credit from future lenders. Your credit history is collated by credit bureaus who then sell the report to prospective lenders who assess your previous payment behaviour and together with your credit rating determine whether they should give you credit. A bad credit rating will inevitably reduce your chances in obtaining credit.

All is not lost though as there are ways to improve your credit rating and your chances in obtaining future credit.

1. Obtain A Copy Of Your Refused Credit Application

You are within your rights to ask for a copy of your credit application to see why it was refused. By reviewing the application you can check for any errors on the application and assess where your rating may need improving.

2. Obtain A Copy Of Your Credit Report

It is possible to assess your own credit worthiness by purchasing a copy of your credit history. Check the report for accuracy and if there are any errors write to the agency to update the details. Even details like your past and present residential addresses can adversely affect your credit rating, as this could mean that the lenders are using someone else’s credit history to judge your credit worthiness.

3. Get On The Electoral Roll

Make sure that you are registered on the electoral roll. Write to your local council to ensure that you are on the roll as lenders and credit reference agencies will use this information to verify your residency details. If you are not on the electoral roll, you may be refused credit.

4. Pay Your Creditors On Time

Ensure that you always pay outstanding debt repayments on time. If you default on payments or make late payments it will adversely affect your credit rating. You can ask creditors to reduce the monthly amount if you are struggling to keep up with payments so to avoid defaulting on your monthly repayments.

5. Get Credit

It is highly unlikely that you will be able to get credit for large sums if you have no credit history. Open up a credit card account and use the card for at least six months. Make sure that you repay the borrowed amount on time and incur no penalties during the period so to build up your credit rating.

6. Don’t Apply For Too Much Credit At One Time

All credit enquiries are recorded on your credit report so if you apply for a mobile phone contract, car insurance and any other type of credit at the same time it may make any prospective lender weary of lending you credit. Space out the applications over a period of time.

7. Ask For A Quotation Search

It is worth asking for a ‘quotation search’ instead of a ‘credit search’ when applying for a specific type of loan. This means that the enquiry will not negatively impact your credit rating as these types of enquiries are not listed on your credit report.

8. Check Your Details On All Debts

Make sure that your creditors have your correct name and address details. If you have an old credit card or mobile phone contract still listed as open but with another residential address, it may block any applications. Close any credit accounts that you are no longer using and update the details on those accounts that you are still using.

9. Clear Any Defaulted Debts

If there are past debt defaults on your credit file, it may prevent you from obtaining any more debt. There are three options available to wipe these bad debts from your file: you can apply to the Financial Ombudsman to wipe any unfair defaults from your file, you can settle the outstanding debt with the lender or you can ask for a ‘Notice of Correction’ to be added to your file explaining why the default occurred.

10. Cancel Credit Cards And Accounts Not Used

If you have too much credit available to you it may hamper your ability to get new credit. Close any disused credit card or bank accounts to lower your available credit rating, however bank accounts with good credit histories should be kept open as they increase your overall credit score.

11. Co-sign Loans Or Credit Card Accounts

Another way of building up your credit rating is to co-sign a small loan or credit card account with a family member who already has a good credit history. Making full repayments on time against the loan or credit card while improve your own credit score.

12. Proof Of Stability

Lenders are more likely to lend money to people who can prove stability. Residing at an address for a long period of time and not switching employers or banks regularly all reflect well on credit ratings. Home owners are also more likely to have an application accepted than renters.

13. Avoid The Rejection Cycle

When an application gets rejected do not apply for credit immediately elsewhere. Each rejection is recorded on your credit profile and negatively impacts your credit rating therefore too many rejections will block you from obtaining future credit. Rather ask to review the rejected application and address the reasons for the rejection.

14. Don’t Tell Lies On Applications

You may be tempted to exaggerate your income or lie about minor details on your credit application, however this is likely to backfire and your application will be refused. The worse case scenario is that you could be prosecuted for fraud. It is always best to be totally honest on your application.

15. Clear County / District Court Judgements

Any judgements made against you will be held on your credit record for six years. If you pay the county court judgement within a month of receiving it, the judgement will be removed from your credit report. If you pay after the month, your report will be amended to reflect that the judgement was satisfied.