We often find that after finishing a Debt Management Plan or IVA, some of our clients have damaged credit ratings. This is to be expected when those struggling with debt have missed payments.
Once you are back on your feet there are many things you can do to start rebuilding your credit rating.
What are the first things I should do?
- Make sure any current debts are registered to your current address and have your correct name. Having debts or credit facilities spread over more then one address can throw up some red flags when you’re trying to gain further credit.
- Check your credit files regularly to ensure all the information on there is correct and up to date. We recommendwww.noddle.co.uk which can provide your credit report for free.
- Register for the electoral role at your current address – Credit agencies often check this when you apply for credit.
- Close down any credit facilities you no longer use. Having unused available credit (on unused credit cards for example) can cause problems if you try to gain further credit.
- Show lenders you are a responsible borrower by paying off your debts on time.
- Don’t make several applications for credit all at once; a large number of applications at once can make things worse so remember to space out your applications.
How do I start to rebuild my credit rating?
In order to start rebuilding your credit rating, you need to show that you are now a responsible borrower by taking out credit and keeping on top of the payments.
Even a mobile phone contract will slowly improve your credit rating, but be sure to keep on top of the payments.
Credit cards can be an excellent way to improve your credit rating, but those with poor credit ratings often find it hard to be approved for one. We found that there are some companies who approve credit cards to those with poor credit ratings.
Aqua – The Aqua Classic card has an interest rate of 35.9% APR and can offer a limit of up to £1,600. This card is available to those on a low income or with CCJs.
Vanquis – This is another credit card designed to improve your credit rating. The Vanquis card an interest rate of 39.9% APR and offers an initial credit limit of up to £1,000. Vanquis also offer cards branded as the Black Dimond Visa, and theArgos credit card.
Luma – Luma is relatively new to the market and offers cards similar to Aqua and Vanquis. The Luma credit card has an interest rate of 35.9% APR and offers a credit limit of up to £1,500.
Capital One – Capital One’s Classic MasterCard is suitable for those looking to rebuild their credit rating and is suitable for those with a history if defaults or CCJs. This card is not suitable if you have been declared bankrupt in the past 12 months.
If you choose to use a credit card to improve your credit rating, you need to keep on top of payments to ensure you don’t further ruin your future credit rating. We recommend making small purchases every month and clearing the balance in full as soon as the statement comes through. This way you don’t pay any interest and improve your credit rating by spending money you would normally spend anyway.
We recommend that you only use credit cards as a way to improve your credit rating, and not to rely on when money is tight.
Your credit history goes back 6 years, any defaults from more then 6 years ago should no longer be visible on your credit report.
Finally make sure that you budget to ensure that you don’t have to rely on credit again. MoneySavingExpert.com has lots of tips on how to budget and how to save money.
If you’re currently struggling to repay your debts, there are many options that are available to you.
At The Debt Advisor we can provide advice on all kinds of debt solutions such as Debt Management Plans (DMP), Individual Voluntary Arrangements (IVA) and Bankruptcy.
Call today on 0800 0851 825 to speak with one of our advisors. If you’re calling from a mobile, you can reach us on 0161 868 2500. Alternatively you can fill in the contact form at the top of the page and we’ll call you!
The Debt Advisor is a member of The Debt Resolution Forum and is also regulated by The Financial Conduct Authority no 606669.