6 ways to improve your credit score
Your credit score is used when lenders decide on whether or not to accept an application for credit. If your credit score is low, it can affect your ability to get a mortgage, take out loans or credit cards. It may not be something that affects you imminently, but it might be something which could have a negative effect on your life further down the line. If you find that you are constantly getting refused for credit, it is probably down to a less than perfect credit score and it may be worth checking this via a credit reference agency to find out. It is not a lost cause though. There are always ways to improve your credit score and these are some ways to help you rectify the poor credit.
Take out a loan
Although you should never take out a loan solely for the purpose of improving your credit score; it can be beneficial for this purpose. A loan should only be taken out if you need it, but if you use it to pay off other debt – such as high interest credit cards, it can improve your credit rating. Many borrowers use a consolidation loan, so that all their debt is in one place, which makes the payments a lot easier to manage. If you are taking out a loan for this purpose, you should only take out the amount you actually need to pay off your other debt. It can be tempting to take out more, but this is likely to leave you in a worse situation.
Pay on time
If you constantly pay bills late – or worse still, not at all – companies will be registering this on your credit file. This means that anytime you make an application for credit, the financial institution you apply to will have access to this information. It is important to pay your bills on time. If you are up to your eyes in debt and constantly fire fighting to get bills paid, get in touch with the lenders to set up an arrangement. You will find that most will be willing to let you pay it back in installments which suit your situation. After all – they want their money back to!
Register on electoral register
In order to have a positive credit score, you need to be on the electoral register. If not, lenders won’t be able to find you, so it will look like you don’t actually exist! If you are paying your bills on time but still not getting accepted for credit, it might be for this reason. It is quick and easy to set yourself up on the electoral register, you can even do it online.
Your credit rating will also be adversely affected if you keep applying for credit, especially if you are doing it consecutively. It is a misconception that your credit score will improve, simply by taking out a lot of loans and credit cards. In fact, it may have the opposite effect. If you take out one loan and make payments on time, this can be far more effective than applying for lots of credit. If you have been applying for a lot of credit, it is time to stop! Give yourself a break and only take out credit when you really need it. You will find that your credit score will start to improve if you are not applying for any credit and making payments on outstanding credit on time.
There are sometimes mistakes made on credit reports, which can affect your credit score and your ability to take out credit. It is important to keep an eye on your credit score and get in touch with a credit reference agency, if there are any errors on your report. It may be that someone else has fraudulently attempted to take out credit in your name and it is important to be aware of any oversights, so you can get them rectified quickly.
If you have joint loans or mortgages with someone else who has bad credit, this could also be adversely affecting your credit score. As harsh as it sounds, it may be time to cut these financial ties, so that you can start to improve your own credit score.