Tips for Boosting Your Credit Rating

Back in April 2013, NatWest researcher, Ed Hallinan, stumbled across YouBlawg’s article on avoiding credit card debt. The article contains some invaluable tips – but one should be aware that it’s not just credit card debt that can land you in financial strife. In this guest post, Ed takes the issue even further, explaining the surprising things you may not have realised can have a seriously detrimental impact on your credit rating.

If you want to get a business loan or mortgage, you’re going to need a positive credit score. And yes, the obvious missed payments, maxed out cards and, worst of all, bankruptcy can all hamper your financial status. However, there are some unexpected, hidden factors that you’d do well to avoid. In so doing you can certainly protect, and perhaps even boost your credit rating.

Late library books

The advent of the Kindle may have led to a dwindling number of library visitors, but the fact remains that there are still 1000s of libraries in operation – England alone has more than 3,300, with more than 60% of UK citizens owning a library card [DCMS, 2012]. While the benefits of reading are well-documented, did you know that the late return of library books actually affects your credit score? All it takes is for the bill to be sent to a collections agency, as community director for credit.com, Barry Paperno explains:

“Collections that can seriously hurt your score can arise from parking tickets and library fines, as much as from medical bills and credit card charge-offs – with the impact to your score being similar.”

Terminating one of your credit card accounts

Cancelling a credit card is a bit like completing an important piece of research, only for your computer to crash and all your work irretrievably lost. Even if you no longer use a card, be mindful that it may well, once upon a time, have made a stalwart contribution to your credit rating. All it takes is for a cancellation to wipe the positive slate clean, resulting in a lower score overall. Terminate at your peril!

Late payments

Ok, so this one is fairly obvious. However, contrary to popular belief, it does only take a single late payment to lower your credit score. Don’t make the assumption that you’ll get away with a few late payments – a credit issuer will flag up the very slightest delay. If needs be, diarise your instalment payments – and don’t let trips abroad or a lack of phone reception scupper your hard work.

A lack of versatility

Diversity is key. Having a credit card (‘revolving’ credit) is one thing, but a loan (‘non-revolving’ credit) is quite another. If you are able to take out both in tandem, and are capable of making the repayment fees, your rating will certainly be boosted.

Too many credit applications

Put yourself in the shoes of a lender: are you more likely to offer a mortgage to someone who has made a few sporadic credit card applications, or someone who makes a few every other month? When applying think:

– Do I need this [additional] credit card

– Will I get accepted

– Can I realistically keep up with the payments?

If the answer to all, or indeed any, of these is no then steer clear. Not only does being turned down for credit affect your rating, an approval makes exactly the same dent. This is due to the ‘hard inquiry’ investigation which needs to be made on every application. Choose your credit card wisely, and keep cards to a minimum.

Car hire

Hard enquiries are not just limited to applications for credit. Some car hire companies will also conduct a ‘hard inquiry’ on your credit which, as we learned above, will negatively affect your score. Therefore, while car hire is often unavoidable, be savvy – if you are going abroad with family, perhaps share the responsibility alternately with your spouse, friend or other family member. Some car hirers require a straight cash deposit as opposed to taking your credit card details – it might be worth scouting these out if you’re worried about negative impacts to your credit rating.

Divorce

Finally, a divorce does not just carry emotional implications. With every divorce, assets are split between the couple. And so, unfortunately, are any debts. It doesn’t matter who ends up taking the mortgage payments, any shortfalls on joint accounts will continue to be registered with both parties. Because of this, one must be especially aware of bankruptcy for, should an ex-partner declare insolvency, you may well receive a call from a debtor on any outstanding balances.