Credit scoring is carried out by lenders, and if you have ever applied for a credit product, you will have been credit-scored during the application process to determine whether you qualify to be accepted. The actual process of credit scoring differs between banks and credit lenders, but the overall purpose it is to assess how well you manage your personal finances and determine whether you are a risky borrower or not. If you suffer from a bad credit score, then you are going to struggle to secure a credit product as it will signal to lenders that you are risky. It doesn’t mean that there aren’t products out there, such as loans for people with bad credit, but companies that offer these products are very few and far between. One of the best things you can do to improve your chances of securing a credit product is to improve your credit score, which is actually a lot easier than you might think. Read on to find out.
Get Yourself On The Electoral Roll
Did you know that simply registering on the electoral roll will help you get accepted for a loan or other credit product? This is because lenders and credit reference agencies use this information to check who you are and where you live. Because of this, it is important your credit record shows the same address details that you use to register. Having the same job and bank account for a long period of time will also help you to secure a credit product.
Space Out Your Credit Applications
Credit reference agencies in the UK don’t get notified if you make a credit application and get rejected. But, a note is made every time a credit search is made by a credit lender. So, don’t apply for too many credit products at once. The more searches that are made in a small amount of time will mean you are less likely to be accepted. Space out credit applications as much as you can and try to find out how likely it is that you will be accepted before applying.
Disconnect Yourself From an Ex-financial Partner
When you take out a joint bank account or joint mortgage with someone, you become financially linked with them. So, if they suffer from a bad credit score, then it could affect yours too (and vice versa). If you have unfortunately split up with your partner, then it is important to inform the credit reference agencies of your disassociation, so it doesn’t continue to affect your credit score.
Close Down Any Unused Cards or Phone Contracts
Some credit lenders might consider the amount of credit you currently have access to together with the amount of debt you have outstanding. Close down any unused credit or debit cards and phone contracts that you don’t need anymore. When closing down accounts, you are going to be asked why you want to leave, so be prepared to stick to your guns and close them down.
Check Your Credit File for Mistakes
Your credit score could be negatively affected if the information about your financial history is wrong. You check for anything that isn’t true including your address or any late payments that you actually made on time. It’s important that you check your credit file for mistakes before you apply for any products to improve your chances of getting accepted.
Make Payments On Time (And, In Full)
Consistently making your payments on time and in full will have a very positive effect on your credit score. When it comes to paying a credit card, however, paying the minimum amount is a lot better than completely missing a payment altogether. If you have lots of small debts across a number of different credit cards, try to consolidate them onto one card. Having one bill to pay instead of multiple will make it easier to manage your finances.
Get Some Credit If You Don’t Have Any
Without any credit, you won’t be able to provide that you can make repayments. A credit lender will have no evidence that you can manage your finances responsibly. However, only get an amount of credit that you actually need.