If you’ve recently been trying to get a new loan or credit card – you might have been having a bit of trouble. While there could be a few reasons for this – one of them might be your credit rating. In this article, we’re going to look at why keeping a good credit rating is so important for your financial future, along with how to make sure you’ve got the best possible credit score. We’re going to give you a few important tips to start improving your credit score right away.
Why is your credit rating so important?
While lenders will take other factors into consideration, like your age and earnings – one of the biggest indicators of whether you’re safe to lend to or not is your credit score. Your credit score, or rating, is built up over a number of years and is affected by either poor or good money management.
If you’ve had a lot of problems with debt and repayment in the past, your score might suffer. Or if you’ve been really good at managing your money, you should have maintained a good score. While this information might not go into much detail, it does give an overall indication of how “safe” you are to lend to.
If you keep getting rejected in applications, it could be because your credit rating is too low – so what can you do to fix it? Let’s have a look…
1. Get a credit history:
Some people have low credit scores because they just haven’t built up enough repayment history. That doesn’t mean they’re bad with money – there just isn’t any evidence to show that they’re good with it. So if you haven’t really borrowed money before or don’t have much of a repayment history – get one. Start with a simple credit card and pay it back in full each month before it starts costing you money. You can check out reliant credit repair reviews to see exactly what you might need to do.
2. Don’t go overdrawn:
Lenders like people who don’t go overdrawn, as this shows poor money management. If you can delay certain costs until you’ve got the money in your account, then do it – and only buy necessities when you’re near your limit. If you do go overdrawn, make sure you pay it off as soon as possible. Not only can leaving this sort of debt to have a bad effect on your credit rating, but it could also lead to spiralling debt that’s hard to get back under control.
3. Don’t miss a payment:
You need to try as hard as possible not to miss loan or credit card repayments. These will cause your credit card rating to fall, and you’ll also be liable to pay additional fees. You could get into even more debt if you miss payments, which will both ruin your credit rating and make your finances hard to manage.
4. Pay off some of your debts completely:
If you can pay off a specific loan or card completely, then do it. Lenders like to give money to people who aren’t extended into loads of debt already, and paying off whole lumps of your debt can also give you a much better credit rating.
5. Pay more than the minimum:
You might be used to paying the minimum every month on your cards and loan repayments, but try paying more than that every once in a while (or every month if you can). This makes you seem responsible and should improve your credit rating. Not only that, it’ll also help bring your finances back into good shape and could benefit your financial freedom in the future.
6. Find out what’s in your credit file:
You can’t start trying to fix things until you’ve found out exactly what your score is – and what other details are in your credit score. Do a quick credit check with one of the many free tools that are available online. When you know a bit more about what’s in your file, you’ll have a clearer idea of exactly how to fix it.
7. Close unused accounts:
If you’ve got a lot of dormant or unused accounts and cards sitting around – it might be a good idea to close them. It looks like poor management to have lots of unused accounts all over the place. This includes store cards and other financial instruments that you aren’t using.
8. Make sure you’re registered to vote:
One of the first things many lenders check is the electoral roll when trying to validate someone’s identity. Not being on the electoral roll could also adversely affect your credit rating.
9. Use a prepaid card:
If you’re having a hard time getting a credit card – try a prepaid one as a way of building up history and proving you’re good with money. These accept anyone and can be a good simple way to boost your credit rating before you get an actual credit card.
10. Don’t make too many applications all at once:
If you keep getting rejected, don’t keep applying straight away. Lots of rejections within a short space of time can have a negative impact on your credit score.
11. Consult an expert:
If you’re having trouble with some of the issues in this article, you might want to consult an expert to help you – especially if you’re missing payments or having other issues. Some of this advice can be free in the right circumstances, so have a look around. You might need an expert to have a look at your credit file and tell you what the best course of action is in your circumstances.
12. Give it time:
Poor credit ratings can’t be fixed overnight. If you’d like to improve yours, then you need to start implementing some of these tips, but give it time. It should slowly start to improve to the point where you can start applying for the loans or cards you want.