Your ability to obtain any form of finance is based on your credit rating but if you have a bad credit rating you can remedy the situation. Credit scores are based on predictability, algorithms and your credit history.

Some credit rating basics:

Even if you pay all your debts on time and rarely use your credit card, this could actually mean that you have a poor credit rating.

It's a good idea to use your credit card on a regular basis, pay the loan back at the end of the month so that you don't incur interest fees, and in turn increase your credit rating.

If you take out a short-term, log book loan from a company such as Car Cash Point, you will be given a loan with the decision based on the age and model of your car which you are using as an asset, not a credit rating. Of course, if you fail to pay back the loan under the agreed terms and conditions, then this will affect your credit score.

Rebuild your credit rating

If you find that your low credit score affects your access to credit, an article in The Gazette suggests that you apply for a Luma, Aqua or Vanquis credit card. These cards are given to people with a poor credit history; they carry higher than normal interest charges, but they will allow you to go about 'demonstrating a history of using a credit card in a responsible manner and help rebuild (your) credit status.' As long as you use the card regularly and make the repayments on time, your credit score should improve.

It's a machine based world

Credit Cards (c) The Economic VoiceGone are the days when your friendly local bank manager could offer you a loan or line of credit simply because he knew that you would have access to cash in the future or he understood that your business model was right for your particular town.

Now it's the machines that make credit decisions. If you apply for credit on multiple occasions this is seen as a negative, even though there is no such thing as a 'universal credit score'. Writing in The Daily Telegraph, financial expert Martin Lewis, suggests that these decisions are not solely based on risk, but about potential profitability.

If you're looking for a loan or credit card, but don't want your applications to be seen by potential lenders, then you can take a look at the Money Saving Expert website to see what's available out there without impacting on your credit score.

Always check your credit files annually

It's a good idea to check up on the information that's held about your credit worthiness with the credit reference agencies. Even machines make mistakes, and if an old debt is still on file or the file hasn't updated your address, it's time to challenge the data and correct it. However, if you're a bankrupt or have a county court judgement, these will stay on file for six years.

Stability is a good idea

Machine based decision-making loves a stable financial history. However bear in mind that cash withdrawals on a credit card or payday loans are seen as a sign that you can't manage your finances.

An article in The Daily Mirror suggests that you always check that you're on the electoral role and also that your credit history isn't joined with that of someone who is regarded as a poor credit risk.

It's a good idea when it comes to rebuilding your credit rating to keep these points in mind and get that score as high as possible.

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