Q&A: Your credit rating questions

As part of a series of special reports, BBC News has been investigating debt in the UK.

The number of people unable to repay their debts hit a record high last year, with more than 100,000 people going bust.

Financial stress is a measure used by the credit agency Experian to define an individual's "potential to become over-stretched and struggle with further payments".

Credit expert Jim Hodgkins, managing director of Experian's online credit monitoring service, answers your debt questions.

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My wife and I owe a considerable amount of money to a number of different creditors. If we got a loan of £25,000 we could pay off most of them and save in the region of £400 per month. But because of our poor credit history we cannot get a loan. What should we do?
Ken Upton, Walsall

Your credit report is the personal history of all the credit you have taken out, such as credit cards, loans and mortgages, plus your repayment record and further information ranging from court judgements against you to your registration to vote. It is held securely by credit reference agencies who receive the information from lenders and public sources, such as the electoral roll and court records.

It is important to ensure that it is up-to-date and accurately reflects your circumstances, as any errors could affect your chances of getting credit. If you disagree with anything in the report, contact the lender who lodged the information or the relevant court and explain your objection, providing documentary proof if possible. If they agree with you, your credit report will be amended.

If you see entries referring to credit you have not taken out, you could be a victim of identity fraud.

Equally, if there are special circumstances surrounding an entry, you can add an explanation - for example, you might have missed some repayments because of illness - lenders will see this and may take it into account in future.

Finally, if you are not registered to vote at your current address, do it now. Lenders use the electoral roll as a precaution against fraud.

My unsecured debts have spiralled to £50,000. I earn £12,000 per year and can't afford my debts. It will take me 27 years to pay them off. I cant afford an IVA (Individual Voluntary Arrangements) and bankruptcy will mean the end of my job. I have lost everything and I'm only 33. What can I do?
Derek, Essex, United Kingdom

Your best course of action would be to speak to one of the specialist organisations that can help with debt problems:

Citizens Advice (www.adviceguide.org.uk) is a registered charity that offers free, independent and confidential advice throughout the UK.

The Consumer Credit Counselling Service (www.cccs.co.uk) is a registered charity dedicated to providing free, confidential counselling and money management assistance to financially distressed families and individuals.

The National Debtline (www.nationaldebtline.co.uk) is a helpline that provides free, confidential and independent advice on how to deal with debt problems. You can reach them by calling free on 0808 808 4000

The unfair thing about our system is that people who get into debt can just have it written off. This is hardly fair on sensible people like myself who don't live beyond their means. Isn't the answer to get rid of IVAs?
Donald Elegance , UK

Although someone may end up paying less through an IVA, it doesn't mean that the debt is written off. An IVA may well be the right option for some people; however, it is not an easy way out of debt. An IVA should only ever be considered as a last resort and after receiving impartial advice. The IVA will appear on a person's credit report for six years, and it is just as likely that they will struggle to get credit in the future as if they had opted for bankruptcy.

Why was a credit card agency allowed to let me get £3,000 in debt when I was signed off work by a GP with mental illness?
James, London

You should really discuss this matter with your creditor. This debt will be recorded on your credit report and could affect your chances of borrowing money in the future. A note can be added to your credit report, which lenders will see when they check it.

My partner is 56 and currently on incapacity allowance. He is supposed to get about £71 a week but because of existing debt and £40-a-week rent he rarely sees a penny. Most weeks I have to give him money just to buy food. However, the benefits people say this is all he can claim and that he is receiving an adequate amount to live on. Is this right?
Chloe, Surrey

Your partner should speak to one of the specialist organisations that can help with debt problems (see above).

How do you improve your credit score if you have a low/bad one?
A G, Bolton

Lenders use credit scores to assess the risk that you will not repay what you owe. This is a mathematical calculation that takes information from two main sources - your credit report and your application. Each piece of information is allocated a value and each lender will use its own formula to calculate a number that represents the risk you represent.

Sometimes the same lender will use a different formula for different products, for instance a car loan versus a mortgage. In general, the higher the score, the better your chance of getting the credit you want on favourable terms.

Your first step towards improving your credit score is to check your credit report to make sure that it is up to date and accurately reflects your circumstances. If you find anything that is out of date or that you believe is inaccurate, contact the lender or, in the case of a County Court Judgment, the court that supplied the information, giving proof if possible, and ask them to make an amendment.

Avoid fee-charging "credit repair companies", which cannot help you to make any changes to your credit report.

Is it worth taking out insurance to cover debt?
Sarah Chatfield-Hood, UK

I'm afraid that we are not permitted to offer financial advice of this nature. What I can say, however, is that if you were to lose your job, or suffer a sudden drop in income, it is important to act quickly.

Contact the lenders you have credit with and tell them about your new circumstances straightaway. Lenders won't think less of you if you tell them your income has dropped.

If you own your home, it is most important to contact your mortgage lender. If you find it difficult to pay your mortgage in the future, you could lose your home. Your mortgage lender does not want to repossess your home and would much rather agree reduced payments or a payment holiday to help you out.

I have been on income support for a few years. The bank kept putting my credit limit up and up, until it reached £3,000 more than my benefit totals in one year. I am now paying £85 minimum payments and £45 of that is interest. I plan to swap to a 0% balance transfer offer. Is this the right thing to do?
Gemma, Spilsby

Credit card surfing - shifting your balance from one card to another to take advantage of introductory interest-free or low-interest offers - should not harm your credit rating, as long as you always make your repayments on time and don't do it too often. You should be aware that your application for a new card with a balance transfer might not always be accepted and making a series of applications until you find a card issuer that will accept your application is also likely to affect your creditworthiness.