Best Ways to Combat a Bad Credit Score
A bad credit rating can severely diminish your chances of successfully applying for a loan or credit in the future. This can have serious consequences including when it comes to buying a home or car.
The two main factors which decide your credit rating are your credit history and how much debt you actually owe at any given time. Faltering on credit card payments and energy bills, ratcheting up County Court Judgments (CCJs) and of course bankruptcy will all damage a person’s credit rating.
By thinking carefully and taking a pro-active stance, financial experts say consumers can take matters into their own hands and can combat a bad credit score by taking some relatively simple measures.
Get a Free Credit Report
Many lenders turn to credit referencing companies such as Experian who track your financial and credit record. Services such as Experian CreditExpert will offer you a free credit report so you can clearly see what your credit score is.
Avoid unnecessary Charges
You could be faltering on bills and payments simply because your address is not updated with your credit card company or energy supplier. Another important tip is to ensure that your registered electoral address is accurate. This is the address to which many companies will send bills.
Look out for mistakes
Your bills could contain mistakes, so make sure you scan over them and ensure that you are being billed for what you actually spent. Otherwise you may find yourself cranking up fines which also leave a murky electronic footprint on your credit rating.
Avoid costly fines
Credit card companies are renowned for issuing hefty fines for missing payments. Firstly, it is crucial for your credit rating that you don’t take out a loan that you can’t pay back. Secondly it is important you keep a regular check on your online bank account to make sure there are funds available when bills need to be paid. Of course, some of us are more organized than others, so if you need a payment reminder then set one up!
Prove you can take a loan and pay it back on time
More than a third of your credit rating is generated by your credit history. This means that if you are able to prove that you can borrow money and pay it back on time over a sustained period, you will improve your rating. One good way of doing this is borrowing small amounts and paying them back on time. If you can do this for at least six months you will improve your credit score.
Paying off your debt
Paying off your debt is one of the best things you can do to improve your credit rating. It is always better to tackle the larger debts with the higher interest rates first, although by making the smaller more manageable debts a priority you could score a few quick victories which will boost your credit confidence.
Credit utilization is about how much credit you have available and how much you actually use. Aiming for around 20% is a healthy place to be. If you are always at your limit, you will give the impression you are struggling to keep up, and of course you also run the added risk of cranking up extra fines.
Lastly, although the word may send shivers down your spine, learning to budget sensibly will give you the best chance of saving your money so that you can pay off your debts and live within your means.