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If you have never been turned down for a bank account or credit card, you might be assuming that your credit report is spotless, and maybe you're right. However, it doesn't take much to permanently affect your credit score, making you less eligible for loans and credit in future.
Money Dashboard have compiled the five golden rules that should be observed in order to remain credit-worthy, or to help you clean up your act if you've started getting rejections already.
1. Don't Ignore Your Score
Your credit score is based on your credit report. It will include a list of all your accounts, such as utilities, mortgage, bank accounts and loans, and a record of how well you have been paying or repaying. Sometimes there are errors, such as accounts appearing twice, or debts still listed as outstanding even though they have been paid off. You can check your credit score with a 30 day free trial of CreditExpert. If there are mistakes call up the company responsible and ask them to fix it.
2. Always Pay On Time
If you miss a payment, or pay it late, this will be recorded on your credit report for at least three years to warn other lenders that you are an unreliable borrower. Don't let this happen! If you are worried about forgetting, set up a Direct Debit on your bank account to pay the bill automatically. If you don't think you can afford it one month, call up the lender and explain your situation to them, they might be willing to reschedule the payment without affecting your credit report.
3. They know where you live...
Ensure that the name and address on your credit report is accurate and up-to-date. Having accounts registered to different addresses can look suspicious, especially to lenders who are trying to verify your creditworthiness by comparing the address you gave them to your credit report. Additionally, if a company writes to you about an outstanding issue and you do not receive the notification, your credit score could be affected without you even realising.
4. Take Caution When Applying
If you've been turned down for a credit card or loan, but you still need the money, it can be tempting to fire off a hundred more applications to a hundred more companies in the hope that one of them will accept you. In truth, you're just piling up rejection notices on your credit report and flagging yourself as a potential fraudster. The trick is to find out why you have been rejected, and either fix the problem, or apply to a company that is willing to overlook it. Don't apply if you think they will turn you down.
5. Going Bust is Not the Answer
Many people struggling with debt and unable to borrow will consider declaring bankruptcy to get them out of the hole. Although this might get you out of paying your bills in the short term, it will leave a black mark on your credit report for the next six years. You could have difficulty opening new financial accounts, and you will be even less likely to qualify for a loan of any kind. Instead, turn to free financial advice organisations like the Citizens Advice Bureau, National Debtline or the StepChange Debt Charity.