This is even more important in the current economic climate with lenders getting stricter about who they will lend to.
In fact, you may now also need to pass a credit check when applying for a contract with a mobile phone company, broadband service or utility provider.
While this may make worrying reading for those currently suffering from a less than perfect credit rating, it’s not all bad news.
There are some simple steps you can take to get it back in shape.
Get a copy of your credit record
Firstly, get your hands on your credit report from one of the three main credit agencies, Equifax.co.uk, Experian.co.uk or CallCredit.co.uk - there may be a charge for this.
"A credit report is like your financial passport," says Tom Ilube from credit report company Noddle.
"Companies look at your report all the time and make decisions about you based on this information, from approving a mortgage to giving you a mobile phone contract."
Put simply, the better your score, the better your chances of getting accepted for credit – and the better the rate you should get.
Simple steps
A simple step to improving your credit history is getting registered on the electoral roll, as lenders should view this as a sign of stability.
Also, paying all your bills on time and making more than the minimum payments on existing credit cards has a positive result as this helps build a good payment history.
Ilube adds: "Avoid keeping a high balance on your credit card, as this may be viewed as excessive debt."
In addition, having too much available credit can also be viewed negatively by lenders as there is the potential for you to get into debt at some point.
To help avoid this, you should close down out-of-date credit cards and cancel old agreements such as store cards.
Avoid multiple applications
Only apply for credit when you really need it, and don’t use a scatter-gun approach by making multiple applications for credit within a short period of time.
This is generally viewed badly by lenders and may result in you getting turned down as it looks like you need credit desperately because you are overstretched financially.
To help avoid multiple credit card applications from harming your credit history, Confused.com offers a free card matcher service which lets you see which cards you are likely to be accepted for before you apply.
Cleaning up your credit record
As well as understanding the significance of your credit score, you also need to know how to repair it.
If you find any errors, you need to write to the particular credit agency immediately, asking for them to be corrected.
For example, if you have fully paid a County Court Judgment, or if your bankruptcy has ended, make sure this is shown on your report.
If there is a particular reason for any blip you may be able to add a note to your file explaining your case.
Financial relationships
One person's financial situation may impact on another's credit rating if they’re linked financially - through a joint mortgage, for example.
Therefore Ilube advises people who are either divorced or separated to sever old financial relationships by making sure their ex’s details are removed from any joint accounts as soon as possible.
Finally, try to steer clear of so-called "credit repair companies".
These claim to be able to get rid of negative information from your report but may charge you for doing something you can do yourself for free.
Credit building credit cards
If you have some serious blemishes on your profile or a limited credit history, there are specialist card providers that may be able to help you access credit and rebuild your credit profile.
For example, credit building cards such as Luma, powered by Capital One, Vanquis and Aqua are all good choices for people with a less than perfect credit history.
You will usually start with a relatively low credit limit and higher interest rates of up to 40 per cent.
But provided you service these cards properly – by making repayments on time and in full and staying within your limit – you can pave the way to a better credit history.
And in turn, you may become eligible for a more competitively priced mainstream card in the future.
source: confused.com
