smallbusiness.co.uk: Helping your business think big

Credit makes the business world go round. And when it stops, you may find your plans to start-up, stay afloat or expand come to a grinding halt. Now more than ever it’s important to make sure you have a good credit history. Annelies Van de Velde of Aqua Credit Card gives her top tips on how to get into your creditor’s good books.

There are two reasons why your credit rating might be poor:
 
•    Little or no credit history

You may be someone who has not applied for much credit in the past, such as credit cards, mortgages or loans. Ironically, this high-risk category also includes people who have always paid their bills on time and have been financially independent enough in the past not to need any credit. You might also be recently divorced or a homemaker, who is or has been financially dependent on your partner.

•    A bad credit history

Many creditors like to see proof of a regular income, although the importance of this will differ between lenders. So if your revenue has been patchy or you’re just starting up after being a homemaker, part-time worker, or temporarily unemployed, you might find it hard to obtain credit.

You might also be affected by any skeletons in the cupboard, such as late payments, bills in arrears, County Court Judgments (CCJs), bankruptcy or Individual Voluntary Arrangements (IVAs).

Register on the electoral roll
 
Many credit rating companies use the electoral roll for identity verification. To register on the electoral roll you will need to complete a voter registration form and return it to your local authority. It is vital you do this every time you move house. Visit the local government website to find out more.
 
Don’t apply for unavailable credit
 
Every time you apply for credit it is noted on your credit report. If you have applied and been rejected several times, your credit history may be getting worse. Stop applying and check your credit rating first.

Check your credit report
 
This will show you the areas where you can improve and will allow you to check for errors on your report. Even a simple mistake such as an incorrect address can affect your credit history. If you do spot a mistake, just write to the agency you obtained your report from and request that it's changed.

You may be able to obtain a copy of your credit report for a small fee from Experian's Credit Expert or Equafax.
 
Create some positive history
 
•      Open a higher interest credit card for which you are more likely to be accepted. Make sure you manage it properly to help rebuild your credit rating. This means repaying every month in full, spending a little each month for six to twelve months, and will usually only work if you just use your credit card for purchases.

•      Make your payments on time and stay within your credit limit otherwise it will have a negative effect on your credit rating.

•      Put bills in your name (where possible) and pay them by direct debit.

Pay by direct debit
 
This way you won’t forget to make your payments on time, which is important because every missed payment will have a negative impact on your credit rating. However, make sure you always have enough funds in your account, as allowing it to go into unarranged overdraft will have the opposite effect on your credit rating.
 
Deal with CCJs
 
This will only apply to those who have had one or more CCJs registered against them. If this is the case and you paid the amount in full within 28 days of the claim being made, then the judgment will have been cancelled and shouldn't appear on your credit record.

If you paid the full amount at a later date, you should obtain a letter of confirmation from whoever filed the judgment and deliver it to the County Court. Once the Court has verified the debt has been paid in full, you can ask them to issue you with a certificate of satisfaction or cancellation, which will involve a court fee. Your record will then show the debt as satisfied.

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