How to be the perfect customer

The latest tips on improving your credit rating from Chiara Cavaglieri and Julian Knight

As far as interest rates go, borrowers are enjoying a golden summer. Mortgage lenders, buoyed by £80bn of Bank of England funding for lending cash, are competing hard for business. As a result, rates on two-year fixed mortgages have dipped below 2 per cent, making them cheaper than inflation. Meanwhile, personal loan rates have finally gone below the levels seen prior to the global financial crisis.

But although banks may be lending and competing again they are still being picky over who they open their coffers to. The latest stats show that seven million credit applications were turned down in the last year and personal loans had 1.6 million applications rejected, followed by 1.2 million credit card applications refused in a single year, according to the Debt Advisory Centre. A further nine million people didn't even bother processing their applications for fear they would be declined. Younger people seem particularly worried about their credit rating with 25 per cent of 18- to 24-year-olds surveyed saying they avoided applying for credit, compared to just 11 per cent of the over-55s.

It has never been so important to understand how the credit system works and, more importantly, how you can beat it.

Every time you open a new form of credit it leaves an electronic footprint on your record. If you apply and subsequently get turned down this also leaves a footprint which could make it even harder to be accepted in the future. The problems don't end there either, with an estimated 7.3 million people with a poor credit rating struggling to open a bank account, take out a mobile phone contract or rental agreement, buy home and car insurance, or even get a job. "Credit's not the only thing that depends on credit ratings. As our research clearly shows, the way you've handled your finances in the past can have a much bigger impact on your life than you might expect," says Ian Williams of the Debt Advisory Centre. "Everyone knows a poor credit rating can stop you getting a mortgage, for example, but what does someone do if renting isn't an option either?"

Lenders score you individually based on their own criteria for the "perfect customer". This varies from lender to lender so one rejection may simply be because you don't suit their particular customer profile. Several rejections are a concern, however, and this usually points to a poor credit score. The higher your credit score, the more likely you are to get accepted and many lenders also reserve their cheapest deals for people with high scores.

Fortunately, bad credit doesn't last forever and there are practical steps you can take to improve your rating, starting with getting copies of what credit reference agencies say about you. There are three agencies - Callcredit, Experian and Equifax - and you are entitled to look at your file from each for £2, although Experian and Equifax both offer free trials for 30 days and you can check your credit record with Callcredit free through

"Given the current economic environment it's now more important than ever for consumers to take greater control of their finances. Having access to your credit report will help consumers gain a better understanding of their credit history and how to improve it," says Tom Ilube, founder of credit checking specialists Noddle.

Minor mistakes such as forgetting to cancel old credit cards and failing to register on the electoral roll will have an impact. Lines of credit still appear on your file if you don't terminate them and lenders may be concerned that you could max these out. You may also have an old address for a mobile contract that you don't use but haven't cancelled, or a financial link to an ex-partner. If you are divorced or separated, remove your ex-partner's details from any joint accounts or loans as their credit history can affect your rating.

If anything is amiss get in touch with the credit reference agency to get it amended. You also need to be vigilant for any products you haven't taken out, in case of ID fraud.

If you want to improve your credit score pay bills on time and avoid a high balance on your credit card. Space applications for credit carefully and only apply when you need it as applying for more than four forms of credit in a year can lower your score. Even with existing cards that you do use, if you don't need the full credit limit get it reduced as this may make you a better risk when you apply for another form of credit. Lenders are looking for stability so use a landline instead of a mobile number on applications. Long-term employment history, sticking with the same bank and living in one place for a long time (preferably owned rather than rented) will all help.

Check your credit report annually at least and use comparison websites such as and to check whether you are likely to get a particular card without placing a "footprint" on your credit report.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

More than 90 years of car history are coming to an end with the abolition of the paper car-tax disc
newsThis and other facts you never knew about your tax disc - completely obsolete tomorrow
peopleBenjamin Netanyahu trolled by group promoting two-state solution
Arts and Entertainment
Kylie performs during her Kiss Me Once tour
musicReview: 26 years on from her first single, the pop princess tries just a bit too hard at London's O2
Life and Style
fashionEveryone, apparently
The erotic novel Fifty Shades of Grey has already been blamed for a rise in the number of callouts to the fire brigade for people trapped in handcuffs
voicesJustine Elyot: Since Fifty Shades there's no need to be secretive about it — everyone's at it
Arts and Entertainment
A new Banksy entitled 'Art Buff' has appeared in Folkestone, Kent
Life and Style
Playing to win: for Tanith Carey, pictured with Lily, right, and Clio, even simple games had to have an educational purpose
lifeTanith Carey explains what made her take her foot off the gas
Arts and Entertainment
The White Sails Hospital and Spa is to be built in the new Tunisia Economic City.
architectureRussian billionaire designs boat-shaped hospital for new Dubai-style Tunisia Economic City
Husain Abdullah returns an interception off Tom Brady for a touchdown
nflLeague has rules against 'sliding to ground on knees'
Arts and Entertainment
Critics say Kipling showed loathing for India's primitive villagers in The Jungle Book
filmChristopher Walken, Bill Murray, Scarlett Johanssen Idris Elba, Andy Serkis, Benedict Cumberbatch, Cate Blanchett and Christian Bale
Life and Style
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Trust Accountant - Kent

    NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...

    Graduate Recruitment Consultant - 2013/14 Grads - No Exp Needed

    £18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...

    Law Costs

    Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...

    SQL Developer (Stored Procedures) - Hertfordshire/Middlesex

    £300 - £330 per day: Ashdown Group: SQL Developer (Stored Procedures) Watford...

    Day In a Page

    Isis is an hour from Baghdad, the Iraq army has little chance against it, and air strikes won't help

    Isis an hour away from Baghdad -

    and with no sign of Iraq army being able to make a successful counter-attack
    Turner Prize 2014 is frustratingly timid

    Turner Prize 2014 is frustratingly timid

    The exhibition nods to rich and potentially brilliant ideas, but steps back
    Last chance to see: Half the world’s animals have disappeared over the last 40 years

    Last chance to see...

    The Earth’s animal wildlife population has halved in 40 years
    So here's why teenagers are always grumpy - and it's not what you think

    Truth behind teens' grumpiness

    Early school hours mess with their biological clocks
    Why can no one stop hackers putting celebrities' private photos online?

    Hacked photos: the third wave

    Why can no one stop hackers putting celebrities' private photos online?
    Royal Ballet star dubbed 'Charlize Theron in pointe shoes' takes on Manon

    Homegrown ballerina is on the rise

    Royal Ballet star Melissa Hamilton is about to tackle the role of Manon
    Education, eduction, education? Our growing fascination with what really goes on in school

    Education, education, education

    TV documentaries filmed in classrooms are now a genre in their own right
    It’s reasonable to negotiate with the likes of Isis, so why don’t we do it and save lives?

    It’s perfectly reasonable to negotiate with villains like Isis

    So why don’t we do it and save some lives?
    This man just ran a marathon in under 2 hours 3 minutes. Is a 2-hour race in sight?

    Is a sub-2-hour race now within sight?

    Dennis Kimetto breaks marathon record
    We shall not be moved, say Stratford's single parents fighting eviction

    Inside the E15 'occupation'

    We shall not be moved, say Stratford single parents
    Air strikes alone will fail to stop Isis

    Air strikes alone will fail to stop Isis

    Talks between all touched by the crisis in Syria and Iraq can achieve as much as the Tornadoes, says Patrick Cockburn
    Nadhim Zahawi: From a refugee on welfare to the heart of No 10

    Nadhim Zahawi: From a refugee on welfare to the heart of No 10

    The Tory MP speaks for the first time about the devastating effect of his father's bankruptcy
    Witches: A history of misogyny

    Witches: A history of misogyny

    The sexist abuse that haunts modern life is nothing new: women have been 'trolled' in art for 500 years
    Shona Rhimes interview: Meet the most powerful woman in US television

    Meet the most powerful woman in US television

    Writer and producer of shows like Grey's Anatomy, Shonda Rhimes now has her own evening of primetime TV – but she’s taking it in her stride
    'Before They Pass Away': Endangered communities photographed 'like Kate Moss'

    Endangered communities photographed 'like Kate Moss'

    Jimmy Nelson travelled the world to photograph 35 threatened tribes in an unashamedly glamorous style