December 05, 2016

How to improve your credit score

When applying for finance on a new van, you will be subject to a full credit check. If you suffer/ or have suffered from poor credit in the past, you may find that you have been refused credit. Although this can give you an unneeded headache, it is not the end of the world, you can improve your credit score by adhering to the advice below.

Here are Vanman’s top tips for improving your credit score:

Register to vote

Make sure you get yourself on the electoral role (if you’re not already on it), lendors will attempt to verify your name and address in order to establish that you do live where you say you do. If you live in shared accommodation or even with your parents, then this isn’t a stumbling block, as you can still apply. Making it easier for financial institutions such as banks to verify your identity. This is not difficult to do, but a vital step in improving your credit score, visit the government website to validate your address.

Build a credit history

Opening a bank account can help you here, your credit score make take a small hit immediately after opening an account, but if you look after your account well and your credit score will improve and you’ll also build up a credit history for yourself. A bank account with an overdraft also helps in building your credit, as its a form of credit in itself and proves that you are able to abide by spending limits.

Have an example of ‘responsible credit’

Lendors like to see your borrowing history as proof that you can sensibly manage your debt. Gaining credit for smaller contracts tends to be easier (e.g. mobile phone contracts or credit cards), if you manage these well, you can prove that you are able to pay your bills on an agreed timescale.

Close any unused credit accounts

If you do not require any old credit accounts, think about closing them, lendors can consider the credit limits available to you and not just the debt that you currently owe. It may work better in your favour to have a limited number of accounts that you manage well with a strong history.

Limit your amount of credit applications

If you continue to make credit applications, lendors may feel that you are reliant on credit to support your income. It is recommended to stick to a ‘three month rule,’ don’t apply for more than one credit application in a period of three months.

Keep your credit accounts for long periods of time

Taking out a new credit account may immediately cause your credit score to decrease, if you look after and manage the account well, it will impact positively on your credit score in the long run. A number of well-managed accounts will benefit you even further.

Keep a high amount of available credit

The credit available to you is the difference between your outstanding balance and your credit limit. If you don’t have much available credit, or have a significant number of accounts with less than 50 percent available credit, lendors may make the assumption that you are enduring a struggle to manage your finances.

Ensure you do not miss a payment

If you have any missed payments within the past six years, then this will negatively affect your credit score, so avoiding this is of paramount importance. As these payments get older, the negative impact on your credit score is reduced.

Avoid delinquent and defaulted accounts

If you do happen to be late making a payment, your credit account will become delinquent. If the borrower fails to repay the loan as scheduled in the initial agreement, then the credit account will be defaulted. Provided the defaulted account is satisfied, it will fall from your credit report after six years.

CCJs, IVAs or Scottish Trust Deeds all have a negative impact

County Court Judgements (CCJ), Individual Voluntary Agreements (IVA), Bankruptcy and Scottish Trust Deeds all have a strong negative impact on your credit score for six years after they were recorded. Six years on, if they are satisfied they will disappear off your credit file.

Avoid continuous rejections

If you do happen to be refused credit, ensure you check your file straight away so you know what the concerns or issues are. Continuously applying and being rejected will not help your credit file, or the chances of you being successful in a credit application.

Credit may be affected by association

If you have a joint account, be it a mortgage, loan, or bank account, be aware of the credit history of the person that you are sharing that account with. Association can mean that their credit history can be analysed when you are scored, if one of you has a poor history its probably best to avoid this. You can also write to credit reference agencies to remove the link by asking for a ‘notice of disassociation’ with that person when being scored.