Your credit rating is what potential lenders look at when you apply for credit or a loan. Making sure that yours is accurate, good or repairing is essential for looking after yours and your family’s finances for the future. Here’s our short guide to help improve credit ratings so that you can live a happier life!
Why does bad credit matter?
A bad credit rating can limit your lending options in the future. When you get rejected for a credit card, miss monthly payments on anything from a store card, to utility bills or even your mortgage, a black mark will be put against your name, and you will then find it difficult to get credit.
Usually, the only financial options available for those with bad credit are those with high-interest rates, and although there is loads of information out there on things such as how to refinance a car with bad credit, sometimes it can be hard to see the wood from the trees.
How do I improve my score?
There are some basic checks you can do to improve your credit rating, and these include:
- Make sure all your debts are registered to your correct name and address
- Ensure that there are no mistakes on your file, such as other people’s debts
- Don’t make too many credit applications in one go – this includes phone contracts, as this will indicate to lenders that you are desperate and put you as a higher risk
- Show lenders you are a responsible borrower by paying back it all back. This might mean taking out a credit card with a very high-interest rate at first, but only spend a small amount and make sure you pay it back in full straight away
- Close down any credit agreements you no longer use
- Joint finances with someone who has a bad rating will affect your score, so ensure you write to your lender to let them know
Where do I start to repair my rating?
The first thing you can do is to make sure that all of your creditors are paid back on time every month. If you are forced to miss a payment, then make sure you contact your lender and be sure to pay it the following month. If you have outstanding debts than pay them off, if you can.
You can obtain your credit history from a credit reference agency and make sure everything is correct and up to date. Being on the electoral roll is also essential, so if you are not on this, make this a priority. It is often found that doing these simple things can really boost your credit rating, and takes little to no effort.
If you have never had credit but still have a bad rating, then this is an easy fix. Lenders like to loan to people who have a track record of paying back on time, so if you have never borrowed money before then you could be perceived as high-risk. All you need to do here is take out a credit card, and as above, it may need to be a high-interest one to begin with, so just spend a little and pay back in full to prove that you are a responsible lender.