A Simple Guide to Managing your Credit Score

To better assist you to read this article, here is a range of definitions. A credit record is really a written record of any credit that you have taken out in the past 6 years. It shows the amounts of money you have been lent and if you have missed any monthly payments etc. A credit record helps would-be lenders to investigate your credit history so that they will be able to choose whether to let you borrow from them. The data on your report is gathered by credit reference agencies like Equifax and Experian. They take facts and figures from public sources (e.g. information from the electoral roll, CCJ's or County Court Judgments etc) and from loan providers as well as financial institutions: e.g. credit accounts, credit applications.

A credit check is an investigation carried out by a potential lender to evaluate whether you are a suitable candidate for a loan. Lenders will study your credit file to become familiar with your current and past credit history. Lenders can then assign you a credit rating to check if the way that you handle your financial affairs satisfies their criteria for credit.

A credit score or credit rating is an approach that possible loan companies use for figuring out the credit suitability of an applicant. Lenders will investigate the would-be client's credit file, the information within their credit application and the level of loan required Lenders will then apply a mathematical scoring formula to understand the level of 'risk attached to lending to the would-be borrower.

Even if your credit score is good, it is important that you keep it that way - or even improve it! The better your credit score, the more choice of credit options will be available to you - and normally with a better interest rate, too.

Building and maintaining a good credit rating doesn't happen overnight, so you cannot instantly repair or improve it. However, follow the tips below and over time you should see that your credit rating has improved:

1. First and foremost, make sure that all your payments are made on time. If for any reason you miss a payment, make sure that you pay it as soon as possible - definitely no later than a month overdue.
2. Keep the outstanding balance on your debts low. A high outstanding balance could negatively affect your credit rating, even if your record is otherwise 'clean'.
3. Check out your credit report regularly (the major credit reference agencies are Equifax, Experian and CallCredit plc). Make sure that all the information on it is up to date and contact the relevant company if you see any errors.
4. Check that you are on the Electoral Roll - this is proof of where you live to potential creditors and if you aren't on there, It will have a negative affect on your rating. Check with your local council.
5. If you are suddenly unable to meet the repayments on your debts due to unemployment, illness or family issues, then call your creditors straight away. They will be sympathetic and should be able to work a repayment schedule. Also try contacting one of the free advice centres available for people in financial trouble such as the Citizens Advice Bureau or the Consumer Credit Counselling Service (CCCS).

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