The road to good credit can seem long and winding, but with a good knowledge of how credit ratings work obtaining credit cards can be a smooth ride. aqua can help you navigate the road to good credit with simple tips assisting you in avoiding the pitfalls of bad credit. With our help, you’ll come out smiling when you reach your destination: a good credit history.
The first step to improve your credit rating is to understand how credit scores are achieved. Your credit score is used by lenders to determine if you are eligible for credit cards. Taking the form of a three digit number between 300 and 850, your credit score poses a higher risk the lower the number and is derived from separate scores from three of the main credit reference agencies: TransUnion, Experian and Equifax. Each uses its own exact, non-disclosed formula which takes into account five factors with approximate importance to your report:
• Type of Credit Used (10%)
• New Credit (10%)
• Length of Credit History (15%)
• Amounts Owned (30%)
• Payment History (35%)
These formulas differ from lender to lender, which is why you can be rejected by one credit card supplier but still be accepted by another.
Before you Depart
There are a few things you can do before departing on the road to good credit which should make the ride less bumpy.
1. Register on the Electoral Roll
Applications for credit cards are often declined because of failed identity checks due to simple errors such as bills being registered to a previous address. Easily solve this problem by registering on the electoral role at your address.
2. Show you Are in a Stable Position
Other things you can do to improve your credit rating are to use a fixed phone line on all credit applications, show that you have a long time employment history and that you have been living at your current residence for a long time. Anything illustrating that you’re in a stable position to borrow credit is noted by credit lenders.
On the bus to credit card success
There are a number of stops on the road to good credit. Get ready for the journey!
1. Time Credit Card Applications and Repayments
If you’re suffering from bad credit you may be tempted to apply for more credit cards each time your application is rejected by a company. Don’t take this risky pit stop on the road to good credit. You’ll face multiple credit checks that will negatively impact your score. Instead, if you’re rejected on your first application try looking into the matter and determine why you were rejected before continuing.
Bad credit checks can also happen as the result of lifestyle choices. If you are considering moving house then make sure that you apply beforehand, as moving can disrupt your score. Credit checks are also likely to achieve a better score when you’re earning. So, if you’re thinking about taking time off work or changing your career, do so after you’ve applied for your credit card. All of these factors contribute towards making you look less risky to lenders.
Make things painless for yourself and choose a date for credit card repayments that will make it easy for you to keep up. You can request a date when you know you’ll have money – just after a pay day, for example. Remember that choosing a date that coincides with your utility payments will make your finances a little bit tighter.
2. Check Your Own Credit
Credit reports can contain inaccurate, damaging information. It is worth checking your report before applying for credit. The Data Protection Act means that lenders must tell you why they have refused you credit. However, their answer could be as vague as “you failed your credit check”. Get around this by carrying out your own credit check using free tools online. These are not exact but you are entitled to an accurate report from Experian, TransUnion or Equifax every 12 months, or after you’ve been declined credit. Report views from yourself will not cause bad credit.
3. Deal with Debt Defaults on Your Profile
Carrying out a credit search on your own profile is an easy way for you to find out about any mistakes that may be giving you a bad credit rating. If you believe that there are unfair defaults on your profile there are ways of removing them. You can settle this through an Ombudsman, or a financial arbiter who works on your behalf. Or, you can negotiate with the lender and either settle the debt in part or in full. The settlement can contain the condition that the default is wiped off of your credit profile.
If all of the above fail and you’re sure that the default is unfair, you can add a “notice of correction” explaining the problem. This can slow the application down as lenders have to browse it manually, but it could help you solve the issue.
4. Ask for a "Quotation Search", not a "Credit Search"
Another way to avoid accumulating views on your credit profile is to ask for a “quotation search” when you’re trying to find out the APR you can expect on credit cards. This will not show up as a view on your credit profile, making you more appealing in the eyes of lenders. Unfortunately, this isn’t an option currently provided by many of the credit card companies. However, it is still worth asking for.
5. Lenders Want Stable Credit Users
To improve your credit rating it is important to look like a stable and responsible credit user. Keeping this in mind is key on the road to good credit. Demonstrate your reliability by using the same details, including address and telephone number, across all credit accounts including mobile contracts and mortgages.
Access to too much credit can also make you a risky choice. Having access to a lot of credit raises the concern that you could use your credit cards all at once and find yourself unable to pay them back. Cancelling most of these accounts can lower available credit. However, it is beneficial to keep open one or two long standing accounts with a good credit history to improve your credit rating
6. Consider to Whom You’re Financially Linked
Sharing financial accounts such as utilities or credit cards with someone who has a bad credit rating can bring your score down, too. If you split with this person, make it a priority to contact credit reference agencies and ask for a notice of ‘disassociation’ to prevent their credit affecting your rating.
The opposite situation is also true: if you ask to be added as an authorised user on an account belonging to a friend or family member who uses credit wisely, you can improve your credit rating by benefitting from their responsible usage.
7. Keep Up with Repayments
Overall, lenders want to see a responsible credit user who pays on time. Reliable payments are essential to arriving at Destination: Good Credit. Take out credit cards or instalment credit and pay back at least the minimum repayments on time. Only borrow what you can afford and use small amounts of credit you’re confident you can pay back on time. If you’re struggling, negotiate to change the date of your repayments to meet minimum amounts on time. This won’t do any favours to your credit rating but it will be less damaging than defaulting.
Get on the aqua bus, destination: good credit
Following all of the above should get you on your way to an improved credit rating. Remember: aqua has a range of credit building credit cards with advantages beneficial to credit card users with bad credit.
Don’t let past experiences hold you back. Regardless of your credit history, aqua is likely to have a card suited to your needs. The aqua Advance card offers a responsible credit limit of up to £1,200 upon opening, helping ensure you don’t spend more than you can afford. aqua Advance comes with the option to reduce your rate by 5% each year for up to three years. With these credit building credit cards offering extra encouragement to use credit responsibly, we hope that you’ll build up a good credit rating in less than six months.
Representative 35.9% APR variable on the aqua classic card.
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