When it comes to credit applications, each lender uses their own criteria, but there are some common factors. We reveal what you can do to boost your chances of approval across the board - and fast.
Increasing your credit score is one of the factors that will make you more attractive to lenders. In general, the better your credit history, the less risky you’ll be in their eyes - and the more likely you’ll be eligible for credit, with competitive rates. So, we take a look at 10 ways you can quickly improve your eligibility for credit.
You should consider registering to vote to help increase your chances. Confirming your identity is something credit reference agencies take seriously, so it can substantially improve your eligibility for finance. It only takes five minutes online, or you can register via the post.
Lenders normally check if you’re on the electoral roll when you apply for credit. They do this to check if you have a stable address, and you are who you say you are. If you appear on the register, it will give them a good impression and boost your chances of acceptance.
Not only this, registering could raise your credit score by around 50 points. This should work in your favour, as the higher your credit score, the less risky you’ll appear to lenders.
To be eligible to vote in the UK, you must be aged 16 years or over. And you need to be either a British, Irish or EU citizen with a permanent address. Or a Commonwealth citizen who is permitted to enter or stay in the UK.
Lenders will check your address to confirm your identity when you apply for finance. So if you aren't eligible to vote in the UK, it could affect your chances of being approved for credit.
Consider updating your address with the three main credit reference agencies in the UK (Experian, Equifax and TransUnion) instead. They can add a note reassuring lenders that you can provide proof of your address if this is the case. This could then help improve your eligibility for credit, but it won't improve your credit score.
Any mistakes or mismatched information on your credit file can show up as red flags to lenders. This includes small errors like misspellings of your name and address, which could make them doubt your identity.
So it’s best to check your credit report regularly (this won’t impact your credit score). Make sure it’s accurate and up-to-date. And also keep an eye out for signs of fraud, such as credit cards or loans you don’t recognise.
If you spot any errors, ask the credit reference agencies to update your credit report for you. This will put you in a better position when it comes to applying for finance.
It’s important that you contact all three of the main agencies in the UK (Experian, Equifax and TransUnion) about mistakes you find.
This is because different lenders use different agencies. So if you update all three, you will have all your bases covered. And you should appear more consistent and reliable to lenders.
Did you know that financial ties can reduce your chances of getting credit if your partner has a bad credit history?
The best way to get around this is to ask the credit reference agencies for a ‘Notice of Disassociation’, which removes old links from your report. That way, any bad credit associated with your old financial partner will no longer reflect badly on you.
But bear in mind that the agencies will only update your records if the account in question is already closed.
If you’re a rental tenant with an excellent payment record, the Rental Exchange Initiative could improve your eligibility for credit by showcasing how good you are with money.
Maintaining payments on time, every time, is one way of building your credit history, which can make you attractive to lenders. But rental payments aren’t automatically recorded on credit reports. The Rental Exchange Initiative has been set up to solve this problem and give tenants more recognition.
It’s easy to join, and it doesn’t matter if you’re a private tenant or rent social or council housing. You can either ask your landlord to report your rental data for you. Or you could report it yourself through CreditLadder or Canopy.
You probably already know it’s important to make all of your payments on time, every time. This will build up your credit history and show lenders that you are responsible with money.
Also, when you apply for credit, lenders carry out affordability checks to make sure you can afford to repay them on top of your current bills. They won’t agree to lend you money if it’ll cause financial trouble.
With this in mind, we suggest that you set up direct debits for all of your bills. That way, you’ll never forget to make a payment.
Just make sure you keep enough funds in your bank account to cover all of your outgoings. And pay at least the minimum payments on your credit cards to keep your credit report clean.
The less debt you have, the less risky you will appear to lenders. This is because one of their main eligibility checks is your debt-to-income ratio.
Again, they want to make sure you can comfortably afford to pay them back. So if you’re in a good position with some savings in the bank, consider putting some, or all, of your funds towards your existing debts.
This doesn’t sound like a fun option, but it could actually save you money. Especially if you are paying more interest on your debt than you are gaining on your savings.
But it’s best to weigh up the pros and cons and decide what is best for you. You may prefer to keep your savings to one side in case of an emergency.
When you apply for credit, lenders want proof that you are maintaining your bill payments. So if your name isn't on any of the household bills at the moment (like gas, electricity or water bills) see if you can add it on. Then every time the creditor receives a payment going forward, they will record it on your credit report. This can help to gradually build up your credit history, as long as you pay on time every time.
But remember that adding your name to bills will create a financial tie with the other person on the account. And if they have a bad credit history it can impact your own eligibility for finance, by association.
The lower your outgoings, the less you will need to borrow, and the more likely you’ll maintain your bill repayments.
So it could be worth listing all of your outgoings and finding areas to cut back on. For example, are takeaways costing you a fortune, or could you cancel your gym membership or TV subscription if you don’t use them? Little things like this can soon add up.
If you manage to reduce your debt level and increase your affordability, it will put you in a good light in the lender’s eyes.
Check out our 100 money-saving hacks for more hints and tips.
Disclaimer: We make every effort to ensure that content is correct at the time of publication. Please note that information published on this website does not constitute financial advice, and we aren’t responsible for the content of any external sites.
Adele is a personal finance writer with more than 10 years in the finance industry behind her. She writes clear and engaging guides on all things loans for Ocean, as well as contributing blogs to help people understand their options when it comes to money.
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