How to increase credit rating with your bank

If you are a credit card user, having a high score on your card will increase your chances of applying for more credit and loans.

A credit card is a card issued by a bank to an account owner, which allows him to borrow funds at the point of making his purchases.

Your credit rating is used to help lenders decide whether to lend you money, how much to let you have and, in some cases, how much interest to charge you.

According to a report by moneyadviceservice.org.uk, your credit rating can affect your ability to borrow money using products such as credit cards, loans and mortgages.

It is best to avoid those things that can have a negative impact on your credit rating in the first place. Here are some of the things that may affect it.

• High level of existing debt: Banks and credit card companies may be uneasy about lending you more if you are already overstretched.

Missing or making late payments on anything from your mortgage, credit card, personal loan, will stay on your credit file for years.

• Applying for lots of credit at once: When you apply for credit, it shows on your credit report. So, it is better to stagger applications. If you just want to compare rates, find out whether the bank can register a ‘quotation search’ on your credit report instead of a ‘credit application search’.

Banks know that quotation searches don’t represent actual credit applications. So, they won’t have a negative impact on your credit rating in the future.

• Open credit card accounts that you never use: Lenders will look at how much credit is available to you, not just how much you are actually using.

Being tied to any joint form of credit such as bank accounts, loans or mortgages with someone who has a poor credit history, known as ‘financial association’, as this will affect your ability to gain credit.

The following points will give you tips on how to improve your credit rating.

If your credit score is poor or you have no history of borrowing for lenders to see, there are immediate steps you can take to improve your credit score.

• Stop applying for credit until you have sorted out any problems on your credit file and improved your credit score.
• Cancel unused credit cards: This also reduces the chances that you will fall victim to fraud if they were to be stolen.
• Pay on time: Make your repayments on time and pay off your accounts early if you can. This shows that you are a sensible borrower. If you are using savings to pay off debts, make sure you keep enough cash in an easy access savings account for emergencies.