If you have been rejected for credit, this may be inconvenient and annoying and you will quite rightly want to understand why.

However, the potential lender will normally not have a specific understanding of why they have rejected your credit application. All they are aware of is that they have compared their payment history criteria to that of yours and the two have not matched.

If you feel that you may have a problem with your credit rating, the first thing to do is get a copy of your credit file so that you can understand if there are things recorded against you that lenders may not like.

If you find this is the case, there are a number of things that you can do to improve your chances of getting credit. These are outlined below.

1. Resolve late payment issues

If late payments have been already recorded on your file which are reasonable and expected, then unfortunately there is little you can do to change them in the short term. The only way to resolve these issues by starting to make your payments on time or repaying bad debts.

2 - Increase the number of positive entries on your file

The more positive credit activities that are recorded on your credit file, the better. A positive activity is basically a payment on time and of the right amount. You can improve your credit history by increasing the number of positive credit activities which you carry out.

One way of achieving more positive entries in your credit file is instead of just using one credit card with a large limit, use multiple cards with smaller limits. Use them all frequently and repay the balances in full at the end of each month.

3 - Remove entries over 6 years old

Your credit file should only show the last 6 years of your credit history. If you had a reason for poor credit over 6 years ago but this was then resolved, records of this should have been removed from your file. If they still exist on your file you can apply to have them removed by requesting this in writing to Equifax and Experian.

It is important to understand that on-going disputes and unpaid debts will not be removed from your credit file simply because they started more than 6 years ago. Only records of resolved disputes (i.e. where the debt has been repaid in full or settlement has been agreed) will be removed entirely after the 6 year period.

4 - Remove any mistakes and errors

It is not unusual for the credit reference agencies to make mistakes when recording information about you. You should check to see whether all the information about your debts is correct and whether information about a third party’s debts has been included in your records by mistake.

Debts Owed by You
If you believe that your credit report is incorrect and shows debt which you do not owe or payment information has been incorrectly recorded, then you can apply to have these changed. You can do this in the following way: 

1. Write to the agency asking it to either remove or change the entry that you think is wrong. Within 28 days from receipt of your letter the agency should tell you that it has either removed or changed the entry or taken no action.

2. If you are still not satisfied, then you should send a "Notice of Correction" to the credit agency:

A Notice of Correction. This is a statement of up to 200 words that will be added to your file as long as it isn’t defamatory, frivolous or incorrect. The statement should explain why you feel the entry is incorrect. Again the agencies have 28 days to respond.

If still no action, resend the Notice of Correction. If information is amended the agency must send details to any lender who has enquired in the last 6 months.

3. If an agency declines your Notice of Correction, your next step is to make a complaint to The Information Commissioner, details given below.

The Information Commissioner
Complaints Department
Wycliffe House
Water Lane
Wilmslow, Cheshire
SK9 5AF

http://www.ico.gov.uk/ You can call their helpline on 0303 123 1113 for advice to help you to solve the problem.

Debts Owed By Someone Else
Perhaps surprisingly, it is common to find a record of someone else’s credit on your file. Often records of credit taken by other people living at your address (with or without the same name) may show up on your file.

If this is the case, you should write to Equifax, Experian and Callcredit and request a notice of disassociation. They will send out a disassociation form for you to sign and return it to them for the record to be deleted from your file.

5 - Make sure you are registered on the Electoral Roll

Registering on the electoral roll will improve your chances of getting credit as it helps to prove that you have a permanent place of residence. If you believe that you are not correctly registered on the electoral role, contact your local council to change this.  Most Councils will have all the necessary forms on their websites available to download.  Electoral rolls exist primarily to enable individuals to register for elections, however up to date registration will also  improve your credit file. 

6 - Reduce the number of searches on your Credit File

Each time you apply for credit, it is likely that the prospective lender will carry out a search of your file. All searches will be recorded for 2 years. It is possible that if you have a high number of searches recorded, this may count against you within some bank’s lending criteria.

If the same company has conducted more than 1 search you can request for these to be removed claiming duplicate searches from the company.
 
7 - Remove the record of a bad debt once it has been paid

The only person who can remove a record from your file is the lender who put it there. If you come to an agreement where the lender promises to remove any record from your file based on settlement or repayment, make sure you get it in writing.

Keep all bank statements which hold proof that you have paid off the agreed settlement. These together with the written agreement from your creditor are enough legal proof to instruct Equifax or Experian to remove a default from your credit file.

8 - What if I have a Default Notice / County Court Judgment?

The record of a default notice and/or County Court Judgement (CCJ) having been issued will have been recorded on your file. By law, these records must remain on your credit file for 6 years from the date that they are issued.

It is normally not possible to have a default notice or CCJ removed from your credit file once it is in place. As such, the best advice is to try and avoid the judgement being made in the first place! If you are being threatened with a CCJ or default notice but do not have the money to repay your debt in full, you must try to agree a reduced repayment plan before you receive the CCJ.

If a CCJ or default notice has been issued and you then repay your debt (either through a lump sum settlement or monthly repayment plan) the record on your file should be marked as ‘satisfied’. To ensure this happens, as soon as you repay or satisfy a CCJ ensure that you forward a copy of the certificate of satisfaction to Equifax and Experian yourself. This will ensure that it is registered against your file thus informing all future lenders that your problem is resolved.

You must remember that recording that a CCJ has been satisfied will not mean that the record is deleted from your file. It will still remain 6 years from the date it was issued.

9 - Pay the debt which you owe

It may sound obvious, however if you are having problems with repaying current debts, the best way of obtaining credit in the future is to first repay what you owe now. Clearly if a creditor becomes aware that you are struggling to repay what is currently outstanding, they will be extremely reluctant to lend you more.

If you have defaulted on your repayments or have ceased payment entirely, then the record of non payment will just continue to be recorded and your credit record will not improve until this situation is resolved.

 If you are struggling to repay what you owe, there are different ways that you can deal with this problem.

Consolidation / Lump Sum Settlement
Approach your creditors and offer a lump sum to settle the outstanding balance. This approach will work best if you have been struggling to repay your debt for a while and the creditor is aware of this or if your debt has been passed to a debt collection agency.

Debt Management Plan
Offer each of your creditors a monthly payment based on what you can afford. The advantage of this solution is that you debts will start to be repaid. The downside is that such arrangements often take a very long time to pay off the debt completely.

Individual Voluntary Arrangement
An IVA is a formal agreement with your creditors to settle your debts over time – normally five years. Your creditors agree to receive a certain amount and then after the agreement if completed, any outstanding debt is written off. This solution can only be put in place by a licensed insolvency practitioner.

Bankruptcy
If you are unable to repay your debt, the best solution for you may be bankruptcy. This process will write off all of your debt in 12 months (although you may still have to pay towards it for a total of three years). Beware that if you are a home owner, your property may be at risk if you choose this option. The record of the bankruptcy will remain on your credit file for 6 years but you will generally be able to start taking credit again within this time.