Contrary to popular belief there is actually no such thing as a ‘credit rating’. What you and all other individuals have is a ‘credit score’ and this is calculated by any lenders that you apply to based on the score of a perfect customer.

So if you and your financial situation are seen as low risk and the product or service that you’re applying for has the potential to make the lender some profit, then you’ll be awarded a good credit score. If however your financial history is less than rosy or the lender sees little potential for profit from granting you credit then the score you’re awarded will be quite low – and this will affect your chances of getting the credit or service you need.

Every lender has their own scoring method and while they are quite similar it means that one lender may approve your application while another turns you down. In order to improve your chances of getting the credit you want you’ll need to ensure your credit score is as good as it can be and below you’ll find a number of tips to help you do this.

Improving your Credit Score
Before you can make changes to improve your credit score you need to know what it currently stands at and this is easily done through one of the online credit reference agencies. Signing up for the free trial period that most sites offer gives you the opportunity to see what the lenders see and to get your average score as it stands now. Once you have an idea of where on the chart you are you can then make the necessary changes to improve your credit score.

There are various ways to improve your score, the basics of which are outlined here:

• Make sure you’re on the Electoral Register. If you’re not you’ll be refused everywhere and this lowers your score.
• Keep the number of applications you make as low as possible. Excessive applications are noted on your credit file and lenders can see this.
• Get a credit history is you don’t have one. This could mean applying for high interest credit cards but used sensibly they won’t cost you a penny and they will increase your score.
• Pay your debt payments on time. Prompt payment of your monthly instalments reduces the chances of a lender adding a note about defaults to your credit file.
• Cancel any unused credit cards and other accounts. Even though they aren’t in use they still count as credit and they will affect your ability to get a different form of credit should you need one.
• Pay off as much of your outstanding debts as possible. Don’t sit on savings while you have debt as this is just wasting money and paying large sums off debts can improve your credit score in some cases.

For more information on these tips we suggest reading our associated page entitled ‘What to do when your Credit Rating is Low’.