Whether it’s spring or not, NOW is the perfect time to improve your credit score and future proof your finances with your own personal financial spring clean. And if you are thinking about starting your own business, it is the essential first step.

What is the problem?
Do you find you never have quite money to do everything you want to do? Are you paying too much for your car insurance or suffering from incredibly high interest rates on your store card? Have you ever been turned down for a credit card, a current account, or a loan? Everything just getting unmanageable? Yes to some or all?

Apart from the credit crunch it could be your history catching up with you. You may not realise that it was that missed payment on your store card four months ago that led to you being refused a new 0% credit card last week, or that by applying for three different car insurance firms this month you could be jeopardising your chances of getting a low-rate loan next month, or that you are being charged a much higher rate of interest on your card than you thought you were getting when you signed up because of something called credit scoring.

Credit scoring
There are three credit rating agencies in the UK, Equifax (www.equifax.co.uk), Experian (www.experian.co.uk) and Callcredit (www.callcredit.co.uk), and each holds its own records about you, such as where you live and how you have managed your money in the past, and it is this data that is compiled by financial institutions to make up your credit score.

Your credit score will affect the amount of interest you are charged, regardless of the financial product you apply for, and this can vary from 0% to a whopping 177% interest! So it is in your best interests to mend your credit score and then cultivate good financial habits for the future. In can quite literally save you (or make you) a fortune.

Credit rating agencies
The credit rating agencies don’t advise lenders about the credit worthiness of people, they don’t share information, and there is no national ‘Black List’ of people who don’t deserve credit. However, since they all use the same basic information about you from the same sources, the results of a credit search from any of them are obviously likely to be very similar because it will be based on you and your past financial history. The exception to this is if you have a good history with your bank or other finance company already, which means you are more likely to get a favourable response than someone who is new to them because they already know your financial habits.

Unfortunately, the credit rating agencies do quite frequently hold inaccurate or out-of-date information about people. This can impact on your score without you being aware of it until you are turned down for a credit card or loan despite, for example, having a good income and a clean financial record.

Financial linking
So how come? Well, one thing that does happen often is financial linking. This is when you live with your partner or a friend, for example, and you are financially linked, whether through something as major as a mortgage or as minor as a bills account.

Say you then go your separate ways, and your partner or friend is then financially irresponsible and creates a whole heap of bad debt, such as regularly going over an overdraft limit, not paying credit cards or council tax, or even defaulting on a mortgage. These things will be listed on their credit record...and, unfortunately, on yours too if you haven’t notified the credit rating agencies. And this will mean that you are also seen as a bad risk, despite not being the person responsible, and consequently could have a lower credit score than you should have.

In contrast, the past history of the house you are living in is no longer taken into account (it’s all about you these days), and neither will the financial information about anyone you live with as long as you DON’T have a financial link with them

Don't have earn enough money
It may be that even after cleaning up your finances, cutting your expenditure, and tackling any unresolved issues, you still don't have enough money coming in. If you are at that poin, then you need to find a way of earning more money and fast, which is where starting a home based business could be the answer to your prayers!

 

© Claire Burdett. No content to be reproduced without written approval of the author.

Claire Burdett is the Founder and Director of Funky Angel. She is a Writer, Journalist, and Editor, Integrated Marketing Expert, and Home Business Mentor.

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