Where this is the case you first need to understand that information about previous debt and repayment problems will normally remain on your credit file for 6 years.
For this reason it is unlikely that you will be able to repair your credit rating completely until 6 years after the last time you had a repayment problem. However there are some actions that you can start taking immediately to ensure that you improve your credit rating as quickly as possible.
Improve your Credit Rating by paying off the debt you owe
It may sound obvious however if you are still having problems repaying current debts you will normally not be able to improve your credit rating until these debts have been paid or settled. If a CCJ or default notice has been issued and you then repay your debt (either through a lump sum settlement or using a DMP) the record on your file should be marked as ‘satisfied’. This will help improve your credit rating.
If you are unable to repay your debt then you should consider starting a debt management solution such as an IVA or Bankruptcy. In the short term your credit rating may become even worse by doing this. However at least you know that the record will remain on your credit file for a maximum of 6 years after which you can start repairing your credit rating.
BMD Tip: It is important to understand that because they are classed as current, debts you are repaying using a Debt Management Plan (DMP) will remain on your credit file until these are paid or settled even if this is 6 years after the debt was taken. As such if you are using this type of debt solution your credit rating may continue to be poorly affected for longer than 6 years.
Removing mistakes and errors from your credit file will improve your Credit Rating
It is possible for the credit reference agencies to make mistakes when recording information about you. You should get a copy of your file and check to see whether all the information on your credit file is correct and make sure that no information about a third party’s debts has been included in your records by mistake.
Mistakes regarding debts owed by you
If you believe that your credit report is incorrect and shows debt which you do not owe or payment information has been incorrectly recorded then you can apply to have this changed. You can do this in the following way:
1. Write to the agency asking it to either remove or change the entry that you think is wrong. Within 28 days from receipt of your letter the agency should tell you that it has either removed or changed the entry or taken no action.
BMD Tip: Information about any missed payments or default notices recorded on your file belongs to the lenders not the credit reference agencies. If this information is wrong it can only be changed with the lenders’ permission. As such you will need to contact the lender and ask them to amend errors of this nature.
2. If you are still not satisfied then you should send a “Notice of Correction” to the credit reference agencies. This is a statement of up to 200 words that can be added to your file as long as it isn’t defamatory, frivolous or incorrect. The statement should explain why you feel the entry is incorrect.
3. If a credit reference agency declines your Notice of Correction your next step is to make a complaint to The Information Commissioner.
Mistakes regarding debts owed by someone else
It is actually quite common to find a record of someone else’s credit issues on your credit file. Often records of credit taken by other people living at your address (with or without the same name) may show up on your file.
If you find this is the case, you should write to the credit reference agencies (Equifax, Experian and Callcredit) and request a notice of disassociation. They will send out a disassociation form for you to sign and return it to them for the record to be deleted from your file.
You can improve your credit rating by using a credit card
Once your past debt problems have been resolved and the records come off your credit file one of the main issues you now have concerning applying for new credit is not that you have a poor credit history but that you have no credit history at all.
The fact that no records of you having used credit are showing on your file is just as much of a concern for potential lenders as if you have records of problems. The reason for this is that lenders have no information on which to base a decision about whether you would be a good credit risk or not.
The best way to overcome this issue is of course to start using credit. But how to do this? One option is to start using a so called credit repair credit card. This type of card is available for people with no credit history. The initial credit limit offered is normally low (between £250-£500). However this should not be a problem because the objective of the card is not to borrow. It is simply to use the card for regular monthly purchases such as shopping and then repay the outstanding debt in full at the end of each month.
By doing this you will start to build up a history of responsible credit usage without incurring any interest charges and significantly improve your chance of being accepted for main stream credit facilities in the future.
Make sure you are registered on the Electoral Roll
Registering on the electoral roll will improve your chances of getting credit as it helps to prove that you have a permanent place of residence. If you believe that you are not correctly registered on the electoral role, contact your local council to change this. Most Councils will have all the necessary forms on their websites available to download. Electoral rolls exist primarily to enable individuals to register for elections, however up to date registration will also improve your credit file.
Reduce the number of searches on your Credit File
Each time you apply for credit, it is likely that the prospective lender will carry out a search of your file. All searches will be recorded for 12 months. It is possible that if you have a high number of searches recorded this may count against you within some bank’s lending criteria. If the same company has conducted more than 1 search you can request for these to be removed claiming duplicate searches from the company.