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You Are Here: Home > Personal Finance > Credit File Help > Credit Cards to improve your credit rating
How to improve your credit rating
At its heart a credit file is a tool used to predict two main things -
  1. The ability of a person to make the monthly repayments on time, and
  2. The total credit granted will get repaid in full (and on time)

As indicated on the credit file basics page information such as how much you earn or how much you're worth are somewhat irrelevant.

This is why an unemployed person might get accepted for credit whereas a high salaried Lawyer can get refused. Perhaps the Lawyer is financially ill-disciplined and always late making the monthly payments.

Your repayment history is therefore critical
Credit ratings deal in hard facts so your repayment history is very important as it paints a true and fair picture of how you've been handling credit in the past.

The trick therefore to improving a suspect credit rating (or strengthening one if it's presently OK) is to create a strong history of borrowing and repaying - borrowing and repaying.

The easiest way to do this is to increase the amount you borrow and then of course repay the debt every month. Note that I'm not talking about 'borrowing' by increasing your overall personal debt, rather borrowing interest free every month via a new credit card, or better still, credit cards.

Slightly alter your spending habits
The trick to making this all work is to slightly alter your spending habits.

Move from paying for everyday goods (Tesco shop, tank of petrol, 2 bottles of wine etc) via cash/debit card to credit card(s).

Then repay this debt in full 2 weeks before the statement date.

Why 2 weeks? Because the last thing you want is a late payment mark on your credit file and if you repay 2 weeks early there's plenty of time to clear up any problems that may arise.

Finally, don't think you have to spend much either, £25 a month or more is fine.

What this is achieving

Every month you spend on a credit card your credit card company will make one of two entries to your credit file -

  1. Monthly repayment made on time, or
  2. Missed repayment

The first is obviously good news. Get a whole series of these positive repayment history marks entered onto your credit file and watch it improve because what it's conveying is -

January: Money was borrowed this month and then repaid on time
February: Money was borrowed this month and then repaid on time
March: Money was borrowed this month and then repaid on time
etc etc

Ultimately this is what a credit file is all about - it's a historical representation of your dealings with financial firms. This past repayment history is then used to determine if you're a good risk or not.

Which Credit Cards to apply for
It's a myth that people with bad credit are automatically refused all Credit Cards.

Most people can still qualify but they can't always choose the deal they want. Instead they have to apply for a specialist Card that is designed for people with suspect credit ratings (see below for more details).

Yes, these cards all have high interest rates, usually around 30% - 50% but this is irrelevant because they should not be used to borrow money.

Instead a new credit card has 2 specific and very important purposes -

  1. To sign another credit agreement - the details of which will appear on your credit file (that's a good thing because it means a financial company has deemed you a good enough risk to do business with), and

  2. To use the card to borrow every month and then repay on time every month - hence lots of lovely positive repayment ticks will appear on your credit file

The following 3 Credit Cards are designed to help improve your credit rating

The Capital One Classic Card

This Capital One card is great for people who want to build or rebuild their credit rating. Before you apply, check you're eligible because you're more likely to be accepted if -

  • You're over 18
  • You have some history of managing your credit even if you have had CCJs or defaults in the past
  • You are on the electoral roll, ie are registered to vote from your address

More details and to Apply


The Vanquis Card

  • The Vanquis Card is Visa branded so is accepted across the world
  • Simple online application process
  • Representative 39.9% APR variable

Although it's normally very easy for people to qualify there are a few restrictions -

  • You haven't applied for a Vanquis card in the last 6 months
  • You're able to verify your address (e.g. bank statements, utility bills, landline)
  • You're not in the midst of declaring bankruptcy
  • You're registered on the electoral role - See how do I get on the electoral roll
  • You're 18+

If you fulfill the above then you should have no problems in qualifying for the card.

More details and to Apply


Summary
I have advised countless people over the years on the above strategy and it works wonders to improve a credit rating.

But please make sure you follow the plan - spend and then repay every month. Do not use the cards to borrow money and/or wasteful spending. If you do there's a good chance the extra debt will cause problems and may even result in a worsening of your credit rating.

Another idea

Use a low-limit card for online purchases


  • Some people are worried about shopping online especially when they use their Debit Cards
  • Debit Cards don't come with the superior financial safeguards of Credit Cards
  • So they use a low-limit credit card to shop online
  • I've been doing this for the last 2-3 years and have a Capital One card with a £200 limit
  • More information on this Capital One card
FREE Report

How to Audit your Credit File

With errors your rating will suffer
How a clean credit rating can save you money
4 steps to a clean up any mistakes
Don't discount the importance of your credit file
It's absolutely critical.....
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