Is it possible to pay to get a good credit rating ?

If not how long is it before bad credit becomes good?

Liz Larcombe

The answer to your first question is ‘no’. So-called credit repair companies are a waste of money and sometimes exist on the very edge of the law. In fact, the new Consumer Credit Act will probably put these disreputable companies out of business. They prey on people in debt and can do nothing at all to help. But there is someone who can improve your credit history – and that is you, with the help of a credit reference agency.

Start by looking at your credit report, a history of what you’ve borrowed – loans, credit cards, mortgages and so on – and your repayment record. Lenders use this information when you apply for credit and they ‘score’ your application, in other words calculate your credit rating, so it needs to be up to date and to reflect your circumstances accurately.

Query anything you disagree with, close any accounts that you are no longer using and make sure your credit report shows that you are on the electoral roll. If you’re not, then register to vote with your local council as soon as possible – lenders use the electoral roll to check who you are and are sometimes unwilling to lend to people who are not registered.

I’m not sure what you class as ‘bad credit’ but if you’ve been made bankrupt, taken out an Individual Voluntary Agreement or have court judgments for non-payment of debts, these will stay on your credit report for six years from the date of the order. If you have paid them off, and as they get older, they have a diminishing effect on your credit rating – but they’re never going to be considered good! Similarly, missed repayments will also been seen by lenders and taken into account – but one missed payment two years ago, for example, is unlikely to actually stop you getting credit.

If you have had any of these major problems but for a good reason – for example, you missed some repayments because of an accident or redundancy but have never fallen behind before or since – you can ask the credit reference agency to help you add a note of explanation to your credit report, which lenders will take into account.

Finally, only apply for credit when you really need it. Credit applications leave footprints on your credit report and a high number of them could lead lenders to think that you are desperate for money – and are therefore a high-risk prospect.