If you’ve found yourself with a low credit score you may know exactly where you have gone wrong. Or you may be left wondering why. No matter what your reason for a low credit score, you should always try to put yourself in a better credit position than you currently have. Rebuilding a low credit score can take time and effort but the credit benefits are massive.
Why is a good credit score important?
In short, the better your credit score the easier it is to borrow money. A better credit score can help you get better rates for car finance, credit cards, loans, mortgages and more. Not only does it make it easier, but it can give you access to the highest credit limits and the most competitive interest rates. Lenders will check your credit history when you apply for credit and decide if they wish to offer you a deal or not. A long history of handling credit correctly and making payments on time can help improve your chances of approval.
How to improve your credit:
Rebuilding a low credit score can take time, especially if you need to reduce the debt you owe or build credit for the first time. Our top 5 tips below can help you to raise your bad credit score for good.
1. Reduce how much debt you owe.
One of the factors which calculates your credit score is how much debt you currently owe. Having high levels of debt and maxing out your credit accounts can have a negative effect on your credit score. Your credit utilisation ratio looks at how much of your available credit you have and how much of it you’re using. As a rule, you should only ever spend around 50% of your credit limit at a time and if you really want to excel your score, use around 30% of your limit and work to pay it off in full. Try to pay down as much debt as possible before you apply for new credit.
2. Make payments on time and in full.
Your credit score is all about future predictions and your previous history of borrowing. The best way to show future lenders you can handle your credit responsibly is to make all your payments on time and in full. Doing so will not only improve your credit, but it makes you a valuable candidate to lend to in the future.
3. Check your credit report.
The information on your credit report can be used to calculate your credit score. It’s important all the information on your credit report is up to date as false information can leave you with a bad credit score. When you make an application for credit, lenders will also cross reference the information on your application with the info on your report. If they don’t match up, you may be declined as it could be flagged up as fraud.
4. Check your report regularly for fraud.
Whilst we’re about fraud, you need to make sure you’re not victim to fraudulent applications in your name. When you check your credit report, there’s a section for the credit applications you’ve made recently. If something doesn’t look right or you’ve never applied for credit, reach out to the credit reference agency who provid4d your credit report as you could be the victim of fraud.
5. Build a small credit history.
Did you know you can have bad credit due to no credit? It seems backwards but, in some cases, you need credit to get credit. Getting credit for the first time can be hard because you have no previous history of borrowing. However, you could consider building a small amount of credit by using a credit card or something as simple as a mobile phone contract. Getting credit for the first time is the first step and then you need to prove you can handle it responsible. Set up a direct debit and make sure you have enough money in your bank account to collect your mobile payment each month. If you’re using a credit building card, make sure you only make small purchases and try to pay it off in full by the due date.
