Rebuilding Credit Rating

Lesley72

Hi, I have recently paid off the last of about £20k of debt and am now "illegitimate" debt free. I have a small loan with black horse £2k approx but thats it. I'm saving hard and keen to buy a property early 2008. How do I go about rebuilding my credit rating? My bank have turned me down twice for an account upgrade despite the fact I earn a good salary. I'm in rented property and been here for about 2 and a half years. Any help or advice would be greatly appreciated. Thanks, Lesley

chica_fi

Hi,

there's not much you can actually 'do' to rebuild your credit rating as much of it depends on factors such as length of time you've been at your address, at your job, as well as credit history.

However, one thing to do, if you haven't already, is get a hold of a copy of your credit report from experian or equifax. This may show accounts or credit agreements that (a) you'd forgotten about or (b) have been settled by yourself but not closed off. Do a housekeeping of your credit report - closing accounts, updating information, ensuring information held is actually correct.

Also, different lenders / institutions use different criteria for assessing applicants so it might be worth approaching another bank to see if they may offer you the upgraded account you're looking for. BUT! - why do you want the upgraded account? What features does it offer that your account doesn't? Cos if it's a cheque book or overdraft, i'd be wondering whether you may be better off without, since you've just paid off all your debts - well done, by the way!

Lastly, remember that every time you apply for credit a 'footprint' is left on your credit report. This would flag up a 'warning' for many lenders if you've applied for credit (or facility such as an all-singing / all-dancing current account) more than three or four times in the last three months.

Sorry this is long! Hope it helps.

fi

BAILIFFCHASER

Get a copy of your credit file and make sure that the debts have been updated as paid if not then you need to chase each company to correct thier records.

smilealot

Hi Lesley72

I know this may be a no no in the DFW books, but I've heard of people applying for a really high rate credit card (most credit card companies will reject you just now, but they probably won't because they charge high rates to compensate for the risk). If you put a small amount on it every so often (small amount that you can afford, i.e. £20 grocery bill when you have the £20 in cash), then REPAY IT EVERY MONTH so you don't pay interest (so maybe you could transfer the equivalent cash amount from current to savings to ensure you have the money when the bill comes in). This shows that you are handling credit sensibly and can help raise your rating. Of course it's dangerous if it may lead you back to old ways (not that I'm suggesting those were you old ways, but they are for many of us).

I hope others don't shoot me down in flames for this, I promise I understand the risks involved (and I'm in no position personally to be rebuilding my rating yet), but I just want Lesley to know the option available to her. We offer advice and she ultimately makes the decision.

Lesley72

Hi there, thanks so much for the replies! I have a copy of my credit file and it's all clean, nothing showing as bad. The reason I was looking for an account upgrade was that I understood it helped my score - I certainly don't want an overdraft or credit as I have more than learned my lesson (the hard way of course!) I've been with my employer for 11 years and my bank for 7. I was weighing up what a "better" account would give me in terms of credit rating versus staying with the same one for a length of time. I'm staying where I am till the 3 years is up as I moved around quite a lot previously due to job and renting.

I guess I just feel despondent that after working so hard to pay off the debt I might not get a mortgage.. :-(

Lesley72

Interesting thought Smile - thanks for that. Anyone have any views on this? I am so terrified of getting back into debt I would definitely not be using the card for things I can't afford..

smilealot

Maybe it's not a good option for you Lesley, I really don't know. I hope that by the end of my 14 years of DMP payments I'll be able to use a credit card in this way - but who knows! Maybe being a debt-o-holic is like being an alcoholic, you're never fully recovered.

You mentioned the trade off between raising opening a new upgraded bank account elsewhere and staying at the same bank. I thought you could be a customer of more than one bank, I certainly was previously. Perhaps you could open a new account elsewhere, but keep your savings with your current bank (or at least some of them). That means you can still say you've been with the same bank for x years :rolleyes2

Lesley72

Smile thats a really good idea, thankyou. Now I need to try and find out which bank is more likely to give me a "grown up" account...!

smilealot

Brilliant! Let me know how you get on. Good luck.

smilealot

P.S. Remember to stay away from banks who you've had debt with previously...

chica_fi

I wouldn't get TOO despondent about prospect of getting a mortgage... perversely, many mortgage lenders are more understanding about circumstances than, say, a credit card or loan provider. This is mainly due to the fact that it is secured lending, ie if things went wrong, they could reclaim your house and recover the funds that way! Obviously worst case scenario but you get the idea. If you have managed to save up a good bit for a deposit and are not intending to borrow excessive amount over a long long term, then they will also look at you as less of a risk, ie you're not overstretching yourself.

frugalpam

chica_fi wrote: »

I wouldn't get TOO despondent about prospect of getting a mortgage... perversely, many mortgage lenders are more understanding about circumstances than, say, a credit card or loan provider. This is mainly due to the fact that it is secured lending, ie if things went wrong, they could reclaim your house and recover the funds that way! Obviously worst case scenario but you get the idea. If you have managed to save up a good bit for a deposit and are not intending to borrow excessive amount over a long long term, then they will also look at you as less of a risk, ie you're not overstretching yourself.

Due to my credit history, I'd ended up with a mortgage lender (GE Money Home Lending) arranged through 'Purple Loans' (another company who I now wouldn't touch with a barge pole) who charged me a high rate of interest which seemed to increase as the fancy took them. I found Chelsea Building Society about a yr ago, and they approved a 'Prospects' mortgage (they'll consider all sorts of circumstances) with a 5.9% interest rate fixed for 2 years. I'd highly recommend trying them - they are a pleasure to deal with

Pam