Getting your credit profile into shape in 2014

With post-Christmas credit card bills hitting door mats over the coming weeks, many UK households will be looking to consolidate their debts in order to get their finances in order. Taking out a personal loan, or applying for a 0 per cent balance transfer credit card can provide an ideal route to do so, however it’s crucial borrowers take time to understand their credit profile before applying, otherwise they could leave a black mark against their name, according to MoneySuperMarket.
 
The comparison site offers useful tips for those applying for credit, to maximise chances of being accepted and avoid blemishes on your credit profiles.
 
Kevin Mountford, head of banking at MoneySuperMarket, said: “Understanding your credit profile is vital before applying for a loan or credit card as this will help avoid rejection or being offered higher rates than expected. Lenders apply very different criteria from one another when processing an application, and so consumers need to prepare themselves accordingly to minimise the risk of being rejected when they apply.
 
“For those with little credit history, or if you know that there are some black marks against your profile, it’s not the end of the road as there are steps you can take to improve your rating and increase your chances of getting a loan. Doing your homework, and using tools such as MoneySuperMarket’s SmartSearch tool, which matches borrowers with suitable credit card products without leaving a footprint on your credit file, can make all the difference between being accepted or rejected from receiving a loan or credit card in 2014.”
 
MoneySuperMarket offers the following tips to improve your chances of being accepted for credit:
 
1. Check the information on your credit report is correct
 
This is crucial in determining whether or not your application is successful. It’s important to understand your credit profile and to check for any errors. If you find a mistake, contact the credit reference agency immediately and ask for it to be corrected, as even minor inaccuracies could count against you when a lender uses your credit report to make a lending decision. It is worth checking your credit file with the three main credit reference agencies, Experian, Equifax and Call Credit as information can vary. Statutory credit reports can be purchased for just £2.
 
2. Remember to pay on time
 
Avoid missing or late payments- paying bills on time shows a lender that you are able to manage your finances effectively, even if it’s just the minimum amount. Otherwise you could risk a black mark on your credit score and penalty charges. It’s easy to forget so set up a direct debit or standing order to safeguard your payments - lenders like it as they know they will receive money from you every month. If you are unable to make a payment, contact your lender as soon as possible.
 
3. Watch out for unused accounts- and close them
 
Financial companies are paying more attention to the total amount of credit available to individuals, rather than just focusing on the amount they owe. It is therefore important to close any accounts you no longer use.
 
4. Avoid a high balance
 
Maxing out your card can be taken as a sign of financial stress. Not skating too close to the edge also eliminates the chance of you being charged for exceeding your limit and losing any introductory offers you might be on. Try to remain within 30 per cent of your credit limit.
 
5. Register to vote
 
Most companies use the Electoral Roll to combat identity fraud so it is vital you are registered to be considered as a safe bet. Make sure you’re registered at your current address, or your application will be declined – even if your credit record is clean. Speak to your local council or sign up online.
 
6. Prove you have credit history
 
Demonstrating you are credit active and can be responsible managing credit is essential. Providers assess potential customers on their previous behaviour and will look for signs that you are capable of repaying money. While you don’t want to access too much, the trick is to build up your history slowly, as having no or little credit history can lead to rejection. It is worth considering opening a line of credit to establish a history - even if you pay it off in full each month. Ensure you have a bank account and pay your bills on time as this will help to show that you can manage your finances and are a good candidate for credit. If you use a mobile phone then having it on contract and paying it in full and on time with a direct debit to prevent missing a payment can have a positive impact on your credit profile.
 
7. Stay honest and take action- pay ahead of time if possible
 
Always complete applications for credit accurately and honestly, lenders will be able to discover lies or half-truths easily and decline your application. If your circumstances have changed- such as redundancy or a divorce, then it’s important to say so rather than struggling to keep up credit payments in silence. If you’ve had a CCJ and it is now settled, make sure the settlement is recorded on your credit file, as they can bring your credit score down considerably. You can place a Notice of Correction on your credit file explaining the background to any arrears, for example, if you missed payments because of illness or unemployment. It is never too late to get back on track, clean up your act and get up to date with payments. Providers may also look favourably on those who can pay off loans agreements ahead of schedule.
 
8. Stop applying and aim for the right targets
 
If you have been refused credit, obtain a copy of your credit rating but don’t keep on applying everywhere else. Each lender search will leave a footprint on your credit profile- rejected applications to several lenders within a short period will show up and may damage your credit prospects. Avoid a scattergun approach and do a bit of research beforehand.
 
9. Show you are stable and secure
 
Moving home or switching jobs can impact on the chances of successfully applying for credit. Lenders want to know that you are ‘stable and secure’ so if you have moved a lot, this could have a negative impact as lenders may see you as a greater risk than someone who has been at the same address or job for a period of time. Having a bank account and a good banking history can also reflect well on any application for credit.
 
10. Search Smart
 
MoneySuperMarket has a SmartSearch credit profiling tool to help those looking for the best credit card deals for their individual circumstances. Customers using the tool will be guided towards the credit cards and personal loans they are most likely to be accepted for.