Guess what! Having a bad credit score is not the end of the world. In fact, a bad credit score can be turned around and it is not as hard as you think. It just might take a bit of time. There are several things that you can do to improve a bad credit score, and today we are going to take a closer look at each of them.
What is a Good Credit Score?
Many lenders do not just look at your credit score and make a decision based on that nowadays. Instead, a broader overview of your financial management is taken into account. That being said; there is still such a thing as a bad or good credit score. For instance, at TransUnion, a good credit score is 4 out of 5. A good credit score with Equifax is over 420 out of 700 and a good credit score with Experian is over 880 out of 999.
In the UK there is no list of “blacklisted individuals. Instead, each lender will rate an individual on the management of their account. If you have a poor credit score, this can affect your future borrowing opportunities, especially if you are considered high risk. The UK Money Advice Service provides sage advice on how your credit rating can impact on your cost of borrowing. The number one reason so many Brits want to improve their credit score is to ensure that their borrowing costs are kept to a minimum, immediately and in the future. So, let us get to work on improving your credit score.
How to Improve Your Credit Score
Improving your credit score is more about diligence and dedication than it is about “hard work”. If you are serious about turning your less than perfect credit score around, you can try the following 5 tips and expect a positive outcome. Of course, you have to be dedicated to the process and diligent in your efforts.
Register on the electoral role.
People who are registered on the electoral role find it easier to get credit. According to Equifax, this is because the electoral role is the best way to confirm someone’s exact identity and ensures that the information provided is true and correct.
Get comfortable where you are (do not move home a lot).
If you move home a lot, lenders will see that your address keeps changing on your credit profile. This does not bode well when lenders are looking for stable, reliable clients. Try not to move around a lot unless you absolutely have to.
Pay your bills on time every time.
If you are the type to forget to make payments or end up paying your bills late, think about automating your payments. Automate your payments for the day before the due date on your bills. If your bills are paid on time or early each month, every month, this will reflect positively on your credit record. The more responsible you are with your existing debts, the more attractive you will appear to lending companies.
Limit your credit utilisation.
When you get a credit card or an account, there is the temptation to spend every last penny available on the account. Maxing out your credit card is easy to do, but you should resist this as much as possible. For the sake of a better credit score, only utilise a portion of the credit available to you as it demonstrates that you can use money wisely and do not push the boundaries when borrowing money. By demonstrating healthy spending habits (such as only utilising 40% of your available credit), your credit score will improve. If you are in a financial pickle and need a cash bail out, try a bad credit loan. These are small loans that are quick and easy to repay with reasonable interest rates attached. They are typically paid out within 24 hours and you won’t get yourself tied into a long term cycle of revolving credit.
Do not snowball credit applications.
Every time you apply for credit, a lender will check your credit score and there will be a note of it on your record. If you apply for credit with 10 companies at the same time, there will be a note of it on your credit record and that doesn’t look good for you. When you apply for credit, do not apply in a snowball fashion (that is making applications with every possible lender). Do your homework first and then apply with one lender. Move on to another lender if the first lender turns you down. If you snowball applications, it shows a level of desperation and that is worrying to a lender.
By utilising these tips, you can change your credit score from poor to great. It takes time and effort, but if it is something that you see value in, it can be done! Dedicate yourself to being disciplined with your money management and apply yourself to the process – soon a better credit score will be yours! Good luck.