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.

Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
Life and Style
The veteran poverty campaigner Sir Bob Geldof issues a stark challenge to emerging economies at the Melbourne HIV/Aids conference
Arts and Entertainment
Benedict Cumberbatch and John Malkovich talk Penguins of Madagascar at Comic-Con
comic-con 2014Cumberbatch fans banned from asking about Sherlock at Comic-Con
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
filmGuardians Of The Galaxy should have taken itself a bit more seriously, writes Geoffrey Macnab
Sir Chris Hoy won six Olympic golds - in which four events?
Life and Style
People may feel that they're procrastinating by watching TV in the evening
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

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Graduate Recruitment Resourcers - Banking Technologies

    £18000 - £25000 per annum + OTE £40,000: SThree: Huxley Associates are looking...

    Associate Recruitment Consultant - IT

    £20000 - £25000 per annum + OTE £40,000: SThree: Computer Futures has been est...

    Business Analyst

    £300 - £350 per day: Orgtel: Job Title: Business Analyst Rate: £300 - £350 per...

    Day In a Page

    Backhanders, bribery and abuses of power have soared in China as economy surges

    Bribery and abuses of power soar in China

    The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
    Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

    Highland terriers steal the show at opening ceremony

    Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
    German art world rocked as artists use renowned fat sculpture to distil schnapps

    Brewing the fat from artwork angers widow of sculptor

    Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
    BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

    BBC takes viewers back down memory lane

    The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
    Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

    Nicolas Cage shines in low-budget drama Joe

    Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
    How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

    Make your own ice lollies and frozen yoghurt

    Think outside the cool box for this summer's tempting frozen treats
    Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

    Fiesta is UK's most popular car of all-time

    Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
    10 best reed diffusers

    Heaven scent: 10 best reed diffusers

    Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
    Commonwealth Games 2014: Female boxers set to compete for first time

    Female boxers set to compete at Commonwealth Games for first time

    There’s no favourites and with no headguards anything could happen
    Five things we’ve learned so far about Manchester United under Louis van Gaal

    Five things we’ve learned so far about United under Van Gaal

    It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
    Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

    Screwing your way to the top?

    Good for Lana Del Rey for helping kill that myth, says Grace Dent
    Will the young Britons fighting in Syria be allowed to return home and resume their lives?

    Will Britons fighting in Syria be able to resume their lives?

    Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
    Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

    Beyoncé poses as Rosie the Riveter

    The wartime poster girl became the ultimate American symbol of female empowerment
    The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

    The quest to find the perfect pair of earphones

    Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
    US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

    Meet the US Army's shooting star

    Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform