How to Rebuild Your Credit History
Do you have some financial skeletons in your closet? All is not lost! We’ve got some top tips to help you rebuild your personal credit history and get back on track.
Your personal credit history is the information contained in your credit report – a comprehensive overview of your borrowing and finances that includes information from institutions like banks and building societies, credit card companies, loan providers, collection agencies, mobile phone companies and more.
Read on to find out how to rebuild your credit history.
Is it possible to rebuild your credit history?
In short, yes! Your credit report, held by one of the UK’s major credit reference agencies, like Experian, Equifax, or TransUnion, also contains a credit score, rated from ‘poor’ to ‘exceptional’, which is based on how well you have managed your borrowing in the last six years.
Your credit report is updated with fresh information about once a month and data is held on your report for six years, after which it is removed (and no longer impacts your credit score).
The six year limit on holding this information should reassure you that it is possible to rebuild your credit history. But there are other active steps you can take to start improving things now.
What information appears in your credit history?
Lenders can access your credit history and credit report to assess the level of risk involved with lending you money, though they must have a valid reason to do so (such as you applying for credit with them
Your credit history, stored in the form of a credit report, contains information like:
- Personal details, such as birth name, name changes, current address and previous addresses over the past six years.
- Known financial associations, such as joint mortgages and bank accounts with your past or current partner or spouse.
- County Court Judgements (CCJs), bankruptcies, and Individual Voluntary Arrangements (IVAs).
- Credit information: how much money you owe, who this is owed to and whether you meet your repayments on time or have ever defaulted on an agreement (this could be for any type of borrowing, including mortgages, credit cards, store cards, etc.).
- ‘Hard credit checks’ that have been carried out by lenders with whom you have made an application for credit. This type of search is a full examination of your credit history from the last six years and leaves an ‘imprint’ on your file to record the number of times you sought credit.
- Fraud committed in your name.
- Fraud you’ve committed using someone else’s name.
What information does NOT appear in your credit history?
Certain types of information are not held by credit reference agencies and will not appear on your credit report. These include:
- Current account information (except if you use an overdraft facility).
- Savings account information.
- Student loan information.
- Details about your employment history or current employer, including your salary or how much you earn if you’re self-employed.
- Criminal records.
- Medical records.
- Driving fines or parking tickets.
- Council tax arrears.
- Personal information about gender, religion, ethnicity or sexual orientation.
If you are a company director, then your company’s finances will largely be kept separate from your personal credit history. Read our guide for more information on how to fix a business credit rating.
Can I change the information on my credit report?
No, if the information in your credit history is correct, you can’t make changes to it.
It is possible to ask a credit reference agency to add a note to your report to explain why any arrears were made on a debt in the first place (perhaps due to long-term illness, or if you lost your job).
If there is a mistake on your report, you can dispute this with the credit reference agency who have to remove it if an investigation deems it to be false. This might be the case if you are the victim of fraud.
Remember, the information stays on your report for six years before being erased.
How can I view my credit history?
You can apply to view your credit report through any of the UK’s main credit reference agencies.
You are entitled to one free copy of it every 12 months from each of the three nationwide credit reporting companies listed in the opening paragraph of this article.
How can I maintain a good credit score?
You can maintain a good credit score by keeping an eye on your finances and only taking on debt that you can manage and repay on an agreed timescale.
If you do find yourself with a bad credit score, you can still borrow in some cases but you are likely to only be approved for bad credit loans or by using a guarantor loan, both of which tend to be significantly more expensive.
Preventative action is always better than trying to improve a damaged credit score.
Here are a few more tips on how you can maintain a good credit score:
- Paying your bills on time.
- Paying off any debts you have as quickly, regularly, and reliably as possible.
- Making some sort of payment against debt, even if the amounts are small.
- Limiting your credit applications. Every time you request credit, a ‘hard check’ is made by the potential lender that leaves an imprint on your credit history. Too many of these, and you could struggle to secure credit in the future
- If you do need to apply for credit, space out your applications with at least 12 weeks between them and thoroughly check that you meet all lending criteria before making your application. You can do this for free via any of the main UK credit reference agencies.
- Communicating closely with anyone that you share joint borrowing with to make sure repayments are being made and the debt is managed well.
- Ending any negative financial associations.
How can I rebuild my credit history?
- Understand your credit score
Credit scores are graded from ‘poor’ to ‘exceptional’. If yours is in the lower categories, you may struggle to be approved for loans like mortgages, credit cards and overdrafts along with pay-monthly mobile phone contracts and utility provisions like gas and electricity.
Happily, there are steps you can take to improve a less than perfect credit score, though many of these will take time to take effect – your poor credit score didn’t happen overnight and won’t be rectified instantly either, though change is possible.
- Check your credit report
Start by checking your credit report online via a credit reference agency to determine which factors are impacting it negatively. Knowledge is power when it comes to your finances. Check that all details included are correct and appeal against any that you feel are false.
It’s also worth asking the credit reference agencies to add a note to your report that explains extenuating circumstances for any arrears.
With a solid understanding of your position with the credit reference agencies, turn your attention towards your own outgoings and accounts and close any unused credit cards, store cards or mobile phone contracts.
- Understand how credit impacts your credit score
Finally, you’ve probably heard that taking out a credit card can improve your credit score. There is a lot of truth to this but only if you can manage to pay back your borrowing, if you miss payments or have trouble repaying it can make your credit score worse.
So the answer to ‘do I need a credit card?’ is only if you can manage to pay the credit. You can build up your credit history by using a credit building card to prove that you can manage credit successfully over a long period of time.
Taking these steps, along with managing your borrowing sensibly in the long term, should ensure that your credit history remains healthy. Rebuilding your personal credit history can be challenging; it’s not always easy to face up to financial facts whether they’re past or current. But it’s an incredibly powerful step to take and can set you up for a brighter financial future with a wider choice of credit cards, mortgages, and other loans.
John Ellmore is a director of NerdWallet UK and is a company spokesperson for consumer finance issues. John is committed to providing clear, accurate and transparent financial information. Read more