How to Improve Your Credit Rating
Your credit rating is one of those things that can tend to sit quietly in the background without you giving it a second thought, until the day you suddenly need it of course. At this point your credit rating becomes a thing which either allows your life to run smoothly or – if it’s not in great shape – it can hold you back from achieving your goals, goals like buying your own home. So how can you improve your credit rating? It’s actually pretty easy to improve your credit score just as long as you understand what is needed.
Pay your bills on time
The first thing that you need to do is to make sure you pay your bills on time. Not all bills will appear on your credit report but some will, such as contract mobiles and subscription television and broadband services such as Sky or Virgin Media. Even if a bill isn’t regularly reported on your credit report however, it can still have a negative effect on your credit rating if you don’t keep up with the repayments, resulting in a CCJ or default being registered against you. A CCJ or default can seriously harm your credit rating for a long time, so we can see how paying your bills on time can improve your credit rating.
Take out some form of credit
You may think that if you’ve never had any sort of credit in your life then your credit rating must be stellar, right? After all, if you’ve never had any credit, then how can you have a bad credit score? Unfortunately, the exact opposite is often true. If you’ve never had any sort of credit in your life then potential mainstream lenders such as TSB will have no way of knowing whether or not you will take seriously the need to make the repayments and to pay on time. With this in mind, if you want to improve your credit rating it would be wise to take out a form of credit such as a credit builder credit card, spend a little money on it each month and then pay the balance off at the end of the month and before the due date, so that you don’t accumulate any interest. This will show potential mainstream lenders that when you borrow money, you can be trusted to pay it back and to pay on time.
Get on the Electoral Roll
Would you lend money to somebody you’d never met before if you were unsure of where they lived? I’m sure you wouldn’t and most mainstream lenders don’t like to do this either. When a lender performs a credit check, one of the things they look to prove is that you live where you say you live. These days this is done electronically and they do it by checking something known as the electoral roll. If you are not already registered on the electoral roll then it is important that you do so as quickly as possible if you are looking to improve your credit rating.
Get a copy of your credit report
If you are not a complete credit newbie and you have had bits of credit in the past, then it is important that you get a copy of your credit report from a company like Check My File to ensure that it does not contain any errors which may be negatively affecting your credit rating. These could include errors such as defaults or CCJ’s which may have been registered improperly, unauthorised accounts being set up without your knowledge or other things of this nature. Regularly reviewing your credit file can help to ensure that your report remains accurate and this will hopefully boost your credit score as a result.
Limit your credit applications
If your credit rating needs some improvement then it is likely that you won’t get accepted for credit by mainstream lenders right away. After being rejected by one lender however, you might be tempted to apply to another and another and another…
You should avoid this scenario at all costs, as making too many applications for credit in a short period of time can harm your credit rating. If you think about the logic of this then it makes sense. If you applied for 10 credit cards all at the same time and each gave you a credit limit of £2000 based on your current financial circumstances, then almost overnight you could have access to £20,000 worth of credit even though each lender only deemed you worthy of a £2000 limit. This could seriously put the lenders money at risk if you were to get into financial trouble in this way. Making this many applications all at one time can also make you seem desperate for money, which could act as another red light to lenders.
Here we have discussed 5 ways by which you can improve your credit rating. Even if you don’t envisage taking out any form of credit anytime soon, it might still be wise for you to address as many of the factors mentioned above to keep your credit rating in good order, just in case.