How to improve a bad credit history

Every person has a record taken of any money they have borrowed from a lender; this is what's known as a credit history. The credit report's main function is to help lenders decide if you are a good candidate for future credit, be that via a credit card, personal loan, mortgage or other product. If you've always paid your loans back on time and stuck within your limits, lenders are naturally more likely to trust you with their funds.

If you've missed a payment here or there though, they may start to question whether you'll be able to pay them back. Luckily, a bad credit history doesn't have to permanently ruin your future finances. In this article, we'll show you how you could improve a bad credit rating.

Check your credit report

First things first, you'll want to get a copy of your credit report so you can see for yourself how your finances check out. This is a crucial step for anyone looking to secure credit, as any issues or even errors on your credit report will greatly impact your chances of being approved. Everyone has the legal right to see their basic statutory credit report for just £2, while the full report is typically available for a monthly fee. You can get a copy of either from companies such as Experian, Equifax or Noddle.

Address and contact details

Secondly check that all of your contact details are correct. If you live in a flat or anywhere with a more complex street address, it's worth checking how it's listed by the council to avoid confusion. You'll also need to ensure that all addresses are up to date, as a mixture of old and new details may make lenders uncertain, and that can cause delays to your application, or even lead to it being rejected.

Contrary to popular belief, an address cannot be listed as having a bad credit history. As long as you're not connected to any joint accounts or otherwise financially associated with them, the people you live with don't affect your chances of being accepted for finance, even if they have bad credit history. More on that below. Just bear in mind that if anyone has engaged in financially fraudulent activity while based at your address, prevention service CIFAS will be obligated to investigate to ensure you were not involved.

Financial history

Next you should check that all of your finances are in order. You'll be able to see any late payments or county court judgements for unpaid bills for the last six years. If you want to question any of the information on your credit report, you should contact the credit reference agency. You have the option of adding a "notice of correction" to any information on your report, which is a written statement of up to 200 words explaining why you were late making the payment. This can mean that your applications take a little longer to process, but it can greatly increase your chances of being accepted.

Sort out any existing debt

Existing debt can be a troubling sign for lenders, so it's always a good idea to sort out any current finances before applying for future credit.

Cancel unused credit cards

If you have any extra bank cards or accounts that you no longer use, it's best to cancel them - especially if they're credit cards. Lenders don't only look at how much you actually borrow, but how much credit you have available to you too.

Register for the Electoral Roll

This is one of the quickest ways to instantly improve your position in lenders' eyes. It's the easiest way for them to determine that you are who you say you are.

Consistency is key

Lenders like to see stability - they're understandably put off by turbulent periods in people's lives. You'll drastically improve your chances of getting approved for finance if you:

The key is to show that you're a responsible borrower with a steady life setup.

Financial associations

If you share any joint accounts, such as with a partner, parent or flatmate, you should make sure that their finances aren't affecting your application success. These people are known as your "financial associations" so lenders will look at both of your credit reports. If the other person has a bad credit rating, this could affect the chances of you being approved. Remember that this doesn't include simply sharing an address though - you need to have an actual financial connection.

Stagger applications

Lenders can be wary of multiple finance applications, so stagger your requests rather than make simultaneous requests. It is possible to shop around for quotes, but ask for each of them to be marked as a "quotation search" rather than "application search" to avoid confusion. This way prospective lenders know that you're actually just doing your research, rather than hedging your bets.

Our best credit cards for bad credit history

Taking your credit history into account, it's time to start thinking about the future. A credit card is a great way to help get your finances back on track and improve your credit rating - as long as you make your payments on time and don't go beyond your credit limits. Depending on the card you choose, you could be offered an interest rate reduction if you manage your account well and you could also build a record of responsible borrowing to freshen up your credit report.

aqua classic

Our most popular credit card, the aqua Classic could help improve your credit history. We continuously monitor your account and could even up your credit limit after four months of on-time repayments. That way, you know your credit history is well on its way to recovery. Representative 35.9% APR variable on the aqua classic card.

aqua reward

Just like our other cards, the aqua reward helps you to rebuild your credit rating but also rewards you with up to 0.5% cashback (up to £100 per annum) on your purchases, providing that you stay within your credit limit, and make monthly repayments on time. Representative 34.9% APR variable on the aqua reward card.

aqua advance

Those wanting to commit to a longer-term solution should take a look at aqua advance. As long as you make your payments on time and stay within your credit limits, we'll drop your APR by 5% every year for three years, until it's down to 19.9%. In the meantime, you'll have built a strong credit report for any future applications. Representative 34.9% APR variable on the aqua advance card.

Don't Forget

Failure to make payments on time or to stay within your credit limit means that you will pay additional charges and may make obtaining credit in the future more expensive and difficult. See more on Tips and advice