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The recent credit crunch has not only prompted high-street lenders to tighten their lending criteria but, for the time being, has also put paid to 100% plus mortgages aimed at first-time buyers. However, first-time buyers are not the only casualties of the credit crackdown. The Financial Services Authority has voiced its fears that up to 1.4 million home-owners could struggle this year when their fixed-term mortgages expire; borrowers with a typical fixed-rate repayment mortgage of £200,000 could see monthly payments rising by as much as £200 once they revert to the standard variable rate. So with the onus firmly now on would-be borrowers to demonstrate that they are a sound financial prospect, a good credit track record is essential.

What are credit ratings?

Credit scores are used to give lenders a fast and (supposedly) objective assessment of your credit risk – you may find yourself struggling to renew your mortgage or to take out a new loan if your rating dips.

Credit agencies
Most UK lenders use the services of one of the two main credit reference agencies, Equifax or Experian to check your financial history. Information comes from a variety of sources that include the electoral roll, any previous county court judgments and details of all credit applications previously made.

How to access your files
The Consumer Credit Act 1974 gives everyone the statutory right to access their own credit information; the easiest and cheapest way is by post. Simply put your request in writing and enclose a £2 administration fee. Alternatively, you can download an information application request online from each of the credit reference agencies websites (see above).

What to look out for
Basics first: check both your current and past addresses. If these are incorrect you could risk being penalised for somebody else’s debts. Next, make sure that your own debts are correctly listed and look out for any mistakes (however minor) on your repayment history. If you discover any, write to both the credit reference agency and the lender who has provided the information, asking that they amend their records to flag up any disputed items.

How can I improve my credit rating?
As every lender has different borrowing criteria there’s no foolproof formula to improve your credit ratings but some things can stack the odds more in your favour…

• Get on the electoral roll – if you’re not you are unlikely to get any credit. Contact your local council who will be able to check and get you added if you’re not listed.

• Catch up with any missed payments and, if possible, try to clear some of your outstanding debts.

• Space out applications – Martin Lewis of Money Saving Expert suggests multiple credit applications over a short period of time can have a detrimental impact on your credit rating (making you look a little desperate) so space them out.

• Keep tabs on your rating – get into the habit of checking your credit file regularly to look out for inaccuracies (that may lead to multiple rejections and lower your rating) and possible identity fraud; i.e. people using your details to obtain illegal credit. If you spot a discrepancy alert the agency immediately.

• Consider a landline – lenders like evidence of stability so a landline looks better than a mobile as a point of contact. Home-owners and employed people score more highly than renters or those who are self employed.

• Pay on time – even if you’re experiencing some financial difficulties always try to stick to the minimum repayment plan, try not to default or miss any payments.

• Be truthful – although it may be tempting to lie in order to secure additional credit, be wary of going down this route. Not only is it an offence but lenders are unlikely to take into account any income or additional collateral that can’t be corroborated.