Top Tips on Rebuilding your Credit Rating

Turning 18 and having a good job meant that applications for loans, catalogues, overdrafts and credit cards were being thrown at me by lots of different banks and companies. I don’t know what made me say yes, I was sensible, I was training to be an accountant but at the same time I was going out drinking, heading to festivals and generally having fun. Paying for hotels and festival tickets on my credit cards seemed like a great idea and you obviously need new clothes, a tent and everything else too. By 2006 I had more money going out to these companies each month than I had coming in so I looked into an IVA. After meeting my Hubby and getting pregnant I soon realised that even the IVA amount was not going to work when on Maternity leave so I filed for bankruptcy.  Over the last few years, I have had to slowly rebuild my credit rating to something that is respectable. 

Here are some top tips that I have used

1. Check your Credit Rating and your credit file.

I used Experian Credit Rating and as I had lived in lots of rented accommodation I had to merge some addresses and correct others. It was amazing to see how many different varieties of the same address there was listed. Having too many addresses on file really does have a negative impact on your credit rating.


2. Open up new accounts and pay them off.  

Rather than adding more debt to an existing credit card, creditors will score you better if you can show that you are able to cope with paying multiple debts. Start small, think back to when you first began attaining a credit history, that’s right!  Store cards and catalogues are a great way to prove you can pay back debts. I set up a direct debit to pay off my catalogue in full each month and used it to buy low-value items that were priced the same elsewhere. Things like ink cartridges or school uniforms were a great way of getting what we needed whilst still rebuilding my credit rating.

3. Consider a prepaid credit card.  

This method is different to a conventional credit card in that you must first make a cash deposit with the provider.  You receive all the same purchasing benefits you get from a major credit card but you will need to ensure that your creditor reports the payment history to one of the credit reference agencies.

4. Use your accounts sensibly.  

Don’t think your credit card is an excuse to go on a shopping spree.  Only spend in moderation and don’t just make the minimum payments. I now have a credit card that I use for my monthly shop. I have a direct debit to pay this off in full each month and only use it for that. This enables me to slowly rebuild my credit rating. The key I have found is to use credit for purchases you need to make not ones that you want to make. Having credit is not free money and you can’t just buy things for the sake of it.

5. Keep your balance low.  

Always try to carry a balance that is 30% of your credit limit as creditors will invariably view huge debts as excessive. Having more credit available than you use is a brilliant way of rebuilding your credit rating. I have multiple catalogues that have a zero balance, I wont use them unless I need too and having the credit available that isn’t being used shows that I am more sensible with my money.

6. Above all be patient.  

Remember that it will take some time for your new credit history to gain momentum and you’re trying to demonstrate that credit cards and loans are not there for your financial survival. It has been seven years since I filed for bankruptcy. It was something I needed to do and I don’t regret it but I do regret getting myself in that situation in the first place. Rebuilding your credit rating after being subject to bankruptcy, court orders or defaults takes a long time and hopefully one day I will be able to get a mortgage and finally be able to buy a house.

When I first started having money trouble I spent a lot of time researching ways to rebuild my credit rating and I am glad to see it finally starting to improve. Luckily there is lots of information available if you know where to look. I found this great article in the telegraph online which includes five ways to improve your credit rating and I borrowed the video from it to show you below.

If you are in debt the best thing you can do is talk to someone and get some advice on how to manage it. It may seem like it never ends but organisations like the Citizens Advice Bureau have seen it all before and know exactly what to do to help. Find your nearest Citizens Advice Bureau office here