A Girls Guide To Financial Freedom

07 July 2009

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Ten Easy steps you can take towards financial freedom

What every girl should know about credit.

Been splashing the cash or saving every penny? Ironically, both could have a negative effect on your credit rating, which in turn will affect how easy it is for you apply for credit, such as a mortgage, a loan or a credit card. Perhaps you have always been good with money, or perhaps your partner manages all your finances for you - your credit rating could still be poor. This may be because lenders don't have enough positive credit history to go on and therefore class you as high risk, making them reluctant to lend to you.

Especially now that we are in a recession, lenders are shy with dishing out credit. Whether you are being turned down for credit now, think you may need it in the future or don’t know what a credit rating is, read this credit-boosting guide and take your first step towards financial freedom.

How credit rating works

When you apply for credit with a company, it will (with your consent) check your credit score through a credit reference agency of which the three main ones are Experian, Equifax and Call Credit. These companies hold your credit report, which includes details of the electoral roll (a list of the names of all people registered at an address who are entitled to vote), County Court Judgments or CCJ’s (a ruling for an unpaid debt issued by a County Court), bankruptcies, your current and past credit commitments and they also show if you have missed or defaulted on any payments over the last six years. As your credit report shows how you have repaid credit in the past, lenders will take it as an indication of how you will repay credit in the future.

The better your credit history, the wider the range of credit products you’ll have access to and the better the rates. A poor credit history will limit your choice and usually means you’ll have to borrow at higher rates, but your credit history can be improved over time.

Understanding the problem

There are two reasons why your credit rating might be poor:

1.You have little or no credit history.

If you are in this situation, you might be recently divorced or a homemaker, who is or has been, wholly or partially, financially dependent on your partner. You might also be someone who has not applied for much credit in the past, such as credit cards, mortgages, loans, etc....

Ironically, this high-risk category also includes people who have always paid their bills on time and have been financially independent enough in the past to not need any credit.

2.You have a credit history, but it is poor.

If you are in this situation, you might be affected by previously bad credit, due to late payments, bills in arrears, County Court Judgments (CCJ’s), bankruptcy or Individual Voluntary Arrangements (IVA’s - a contractual arrangement with a creditor to avoid bankruptcy).

Another reason you might find yourself in this situation is if your partner or ex-partner has a bad credit rating and is or was linked to you financially (e.g. joint accounts), which means this will affect your rating too. Therefore, if you split up with someone you have joint finances with, it may help your credit rating if you separate your accounts as soon as possible – you can also write to the credit reference agencies and ask for a notice of 'disassociation'.

Finally, many lenders like to see proof of a regular income, though the importance of this differs for each lender. Therefore, if you are a homemaker, part-time worker, temporarily unemployed, self-employed or have an irregular income, you might also find it hard to obtain credit.

Ten Easy steps you can take towards financial freedom

Step one: Register on the electoral roll

Many companies use the electoral roll for verification purposes in order to combat identity fraud. To register on the electoral roll you will generally need to complete a voter registration form and return it to your local authority. It is vital you do this every time you move house. Visit the local government website to find out more.

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