5 steps to take control of and improve your credit report

Representative Example

Total amount of credit £80, duration of the agreement 29 days, rate of interest 292% per annum (fixed), total amount payable (in one repayment) £98.56. Representative 1281.8% APR.

Understanding and utilising the information available in credit reports can seem like a daunting task to many. What should you be looking at? What will potential creditors be considering when assessing the information available in your report? How should you go about increasing the likelihood of being accepted for an online loan in the future? Whilst these may seem overwhelming to begin with, having an understanding of the ways you can go about taking control of and improving your credit report will only help tackle some of these uncertainties.

Read on to find out 5 steps you can use to take control of and improve your credit report.

Man walking up steps

Monitor your credit report

If you have not previously checked your credit report now is the time to do so. The earlier you have knowledge of what is visible in your credit report the easier it will be to maintain or improve your report for the future.

Try and access your credit report from multiple Credit Reference Agencies (CRAs) instead of just one. Each CRA has a unique report for each individual based on which creditors provide them with information as well as their individual recording methods. The information that appears on one agency's report may not appear on the others, which could mean that you will not have a full overview of your financial standing unless you have access to multiple reports.

Periodically accessing your credit report to monitor any changes that have been recorded is also a necessary step to ensure that you remain in control of the information being used to represent your financial position. Leaving long gaps between checking your report can prove risky as new information that you are unaware of may be recorded.

As we have previously established, having incorrect information recorded on your credit file can only cause detriment to your credit score. Therefore, you are only helping yourself by correcting any incorrect information that may be appearing on your credit report.

Understand what is contained within your report

Having access to the information in your credit report is in itself insufficient if you do not understand the reasoning behind and the consequences of having said information in your file. By having an understanding of the information visible you will be able to take steps to both maintain and improve your report going forward. For example, by knowing which credit accounts in your report are resulting in a lower credit score, you will be able to take the necessary measures to better your score by improving said accounts.

Without understanding what appears in your report you are less likely to be aware of what should be appearing in your report and how this could be negatively impacting your file. The same applies for anything that is not appearing in your report. It is not always the case that information needs to be removed to improve your file. As we have previously examined, adding accounts which demonstrate encouraging repayment habits can be considered positively by potential creditors.

Budget and plan for future payments

In order to have full control of your credit report and have it mirrored positively you need to be able to demonstrate that you are in some kind of stable financial position. One way to achieve this is to create a budget for your finances. Budgeting is a great way to keep your finances in check whilst planning for any future credit commitments.

Budgeting is also a great way to monitor your credit commitments, including how much of your available credit is being utilised. It will also help you keep track of your payments and establish timelines as to when your credit commitments will be settled. By planning for future payments, you are less likely to default on accounts and more likely to create healthy repayment patterns that will only demonstrate positively in your credit report.

Forecasting is also a great way to manage your finances and thus your credit report. By forecasting for any potential future credit commitments, you will be able to improve your credit report to ease any borrowing decisions you need to make in the future.

Cut back on unnecessary spending

As we previously explored, having high levels of debt can negatively affect both your credit report and score. By monitoring your expenses and reducing unnecessary expenditure, the requirement to use credit is minimised resulting in lower debt levels. Before making any non-necessity purchases, always consider whether or not the expense is necessary and how it could impact on your future financial health. Every decision adds up in the end!

Research before making borrowing decisions

Fundamentally, any information that eventually appears in your credit report does so as a result of a financial decision you have previously made. Therefore, making planned and informed decisions before opening any new credit account can only minimise any unnecessary detriment from occurring. By doing extensive research you may be able to select a potential credit option with the same principal amount, but lower interest rate compared with the option you may have chosen should you have made a snap decision. Attaining unnecessary credit which could impede your chances of getting credit in the future will only result in undue stress and delay your chances of obtaining necessary credit.

There are multiple ways to take control of and improve your credit report. The five steps explored above are not exhaustive, but if implemented, are guaranteed to create positive changes to your credit report and credit score. The earlier you take the necessary steps to control and improve your credit report the better your chances of achieving your financial goals in the future.