How to win the ratings war

If you think the worst of the credit crunch is over – think again.

Research by the Bank of England found more consumers feeling the pinch in the past three months as banks became increasingly twitchy about who they lent to.

What’s more – to twist Labour’s theme tune – the Bank warned "things will only get worse" with the squeeze on borrowers set to become a stranglehold in the coming quarter.

Its pessimistic findings could persuade the Bank to cut interest rates again soon, possibly even at this week’s meeting.

But if that suggests good news around the corner the reality is that may have little or no impact on mortgage or personal loan rates.

Despite growing belief that the base rate is coming DOWN the past week has seen almost daily bulletins from banks and building societies putting the cost of loans and mortgages UP.

Loans of all variety are not only becoming more expensive but also harder to secure, according to the Bank.

The days of easy money – when banks thrust loan and credit card offers through people’s front doors almost daily – are over.

Instead of throwing money at people, lenders are becoming increasingly cautious and putting mortgage, loan and credit card applications under the microscope.

This means only people with tip top credit ratings will have their applications accepted and the slightest blemish will mean you are charged more.

In such a climate it is more important than ever to treat your credit rating like pure gold.

So here are 10 top tips to stop it getting tarnished.

1) There are three credit reference agencies that hold your details – Equifax, Experian and Callcredit. Contact them and get a copy of your file. If you spot any mistakes, get them corrected ASAP!

2) Make sure you are on the electoral roll. If you’re not you don’t exist or will be starting from scratch in the eyes of many lenders.

3) Borrow some money! You might think someone who has never been in debt would have a perfect credit rating – but that’s not true. Lenders want to see evidence that you can handle being in debt.

4) Set up standing orders to make sure you don’t miss a credit card payment or energy bill which could be very costly.

5) Check your bank statements to make sure you haven’t missed any bills, slipped into the red or been the victim of fraud.

6) Cut up and more importantly close down any old accounts – such as credit cards – you no longer use. You could get turned away if the lender believes you already have too much credit at your disposal.

7) Don’t get "application happy". Each time a bank or building society checks your credit rating it leaves a "footprint". If lenders see too many other footprints they may think you’re on a borrowing binge.

8) Don’t delay – pay today. If you’ve any spare cash and can clear an outstanding loan early it will look like you’re on top of your finances. Do check first to be sure you’re not going to pay a penalty charge.

9) Don’t overstretch yourself. Resist spending or the temptation to borrow more than you will be able to repay comfortably as missed payments will be a costly own goal.

10) If you have had problems in the past – including County Court Judgements (CCJ’S) – maybe due to redundancy but are now in a healthy financial position have a note put on your file.

For CCJs you may need to obtain a Certificate of Satisfaction from the County Court and send it to the credit reference agencies.

By Clinton Manning

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