A reader asked:
My credit rating is very low. I missed payments on three debts five years ago after I was made redundant the previous year. They have default dates in a year or two later.
Since lockdown I have been paying them off slowly. One was paid in full last year and another just repaid this month, but my score hasn’t changed. One more is being paid £50 each month but that won’t be gone until end next year.
I have one credit card which I got two years ago as that was to try and improve my score. The balance is low and I have no issues with it. I now have a real fear of being in debt as I have discovered six years is a long time. Is there anything I can do to improve my credit rating any faster?
Repairing your credit record takes time
This can seem like a very long slow process but you are doing all the right things!
As the defaults get older, they start to have less effect on your credit score. And repaying the debts prevents any problems with CCJs, which would spoil your credit record for another six years.
By having a credit card you are repaying on time, a good repayment marker is added each month. At the moment these good markers don’t seem to help you much because of the defaults. But when the defaults have gone, all that is left will be three years of good debt management, giving a very good credit score.
From what you have said, I expect the next two years will see your credit rating change as follows:
- a small improvement in your credit score as your good credit marks from the new card continue. It won’t be a big change because of the three defaults still showing.
- an improvement when the first default drops off your file, six years after the default date;
- another one when the next default goes;
- a big improvement when the last default goes, taking your credit record up to very good.
At the moment it probably seems like getting your credit rating up is the most important thing, but that last debt does need to be repaid. Even after it has gone from your credit history the debt still legally exists and you should carry on repaying it or you may get a CCJ.
Can this be made faster?
There isn’t much that can speed credit score improvements. They take time. Never pay for a service that claims to do this.
Repaying the final debt will not change your credit score – but it may make other lenders more likely to give you credit.
If you can get your new credit card balance down to zero, repaying it in full each month, that gives an extra boost to your credit score, see How much will my credit score change if?
Also, your current credit card may not feel like a problem, but you are still paying a high rate of interest on it, so by clearing the balance you stop paying any interest and you may be able to pay more to the remaining default.
Getting another credit card or a loan isn’t going to help, it will just be expensive. And new credit always makes your credit rating worse for the first few months!
Improve your score by saving?
Have a look at LOQBOX.
If you can save £20 or £30 a month every month for a year, LOQBOX reports this to the Credit Reference Agencies as though you are repaying a loan which is good for your credit score. And you get all your money back at the end of the year.
This doesn’t get rid of problems on your credit record, but it gets some new positive marks on there.
Look out for these problems
It sounds as though you have looked at your credit record in detail and are being very careful with your finances. I’m not expecting that you will have any of the following problems, but it’s worth being sure!
- make sure you are on the electoral roll. Lenders use the electoral roll to help confirm your identity when you apply for credit. And it adds about 50 points to your rating;
- make sure all your bills are paid on time. It would be a pity to see the last of your defaults disappear only to find your credit score still isn’t great because of a recent late payment for a water bill!
- make sure you check your credit details with all three Credit Reference Agencies as they may have different data. See How to check you credit score which looks at the best free reports to use;
- look out for errors on your credit reports. For example, check you don’t have any financial association with an ex-partner showing which could be causing you problems.
Have you had problems with unaffordable credit?
This is a situation where you may be able to get a default deleted from your credit record if the credit was unaffordable at the time it was given. For example if your credit limit of a credit card was increased too high or if you are in your overdraft every day of the month and have been for well over a year.
If the reader’s problems were only caused by redundancy, then the credit was probably OK when it was given. But if she had already been having problems, it’s worth looking at affordability complaints. Read Making affordability complaints which has articles for the different types of debts, each with a template letter you can use.
Want to get a mortgage?
I’ve written a separate article on this, because mortgage lenders have some specific requirements you need to know about: How fast can I improve my credit score to get a mortgage?