How to Improve your Credit Rating

A good credit rating is one thing that helps lenders say yes to your application. That’s why it’s useful to know what things can affect your credit rating – and how you can improve it.
What is a credit rating?

In a nutshell, a credit rating is a sign of how a typical lender would assess you. A higher credit score can help with increasing the chances of being approved for the best financial products at the best interest rates.

And it’s not just banks that look at your credit score. Mobile phone providers, utilities, insurance companies, rental agencies and lots of other service providers rely on it. So, it’s always worth trying to work on your credit score and make it the best it can be.

Whether you’ve recently been turned down for credit or just want to apply in the future – look at some of the ways you could help improve your credit score.

Check your credit report and correct mistakes

Check your credit report at least monthly to make sure that the information it contains is correct and accurate.

Your credit scores begin with your credit report. The information in your credit report is used to calculate your credit scores. Checking if often can help ensure the information is being reportedly correctly to the credit bureaus. Check to make sure that the amounts owed, and your payment history are correctly listed.

If you notice any mistakes, it’s important to get them rectified as soon as possible. This will ensure that it’s not dragging down your credit score unnecessarily. Also so that it won’t have adverse effects on future credit applications. To do this, contact the company that provided the incorrect information to have this investigated.

There is currently a rise in identity theft so it’s a good idea to keep a frequent watch on the information recorded in your credit report.

Get on the Electoral Roll

Being registered on the Electoral Roll helps lenders check your address, and make you appear more settled and stable…Especially if you’ve been at the same address for a while. This can mean that you’re more likely to be approved for credit. So if you’re not sure it’s worth checking!

It also helps with their identity verification checks. Take care to be consistent in your applications. For example, make sure you write your name the same every time and using the same mobile number on your applications if possible.

Stay within your credit limit

Mistakes and overspends can happen, but it’s important to try your best to keep below your credit limit. Going over could cost more in charges and can make you look untrustworthy to lenders. Even if you clear the balance by the time payday comes around.  Staying within your credit limit and making regular repayments shows lenders you’re on top of your finances.

Check statements or online accounts to get an idea of how close you’re getting. Or have a chat with your lender to see what steps you can take if you need help.

Open new accounts only as needed

If you plan to open a new credit account for additional spending power or even to attain a better credit mix, be careful. Opening new credit accounts adds hard inquiries to your report and could ultimately result in more debt than you can afford to repay, both of which could negatively impact your credit.

On the other hand, if you close unused accounts, it could lower your credit scores because you lose the credit available on those accounts, making your credit balances a greater percentage of your available limits.

Accounts that you’ve used responsibly for years is a great sign that you know how to look after your money. As a rule, you should aim to keep accounts with a long history of good repayments.

Take care when applying for new credit

Making a lot of new credit applications at once can make you appear risky to some lenders and this can negatively impact your credit score. Whenever making an application for new credit, the lender’s search leaves a footprint on your credit history. So too many applications can imply that you’ve failed to get the credit that you want.

Financially linked to someone else

If you are thinking of getting a mortgage or joint account with someone, it’s worth knowing that your future credit rating will be affected by the other person’s previous financial record too.

Other people may appear on the credit report if they’re registered to vote at your address, or if you share a mortgage or joint loan with them. Lenders may use this information to help them decide whether they give you credit or not.

Pay your bills timely

Your payment history may be reported to the credit bureaus. Delinquent payments are one of the most important factors on your credit report that are considered in many credit scoring models. If you don’t pay your bills on time, your credit scores will suffer.

Avoid payday loans

Some lenders can see payday loans as a sign that you might be going through a complicated time with your finances, which could go against you. But your rating will not really be damaged by high interest short term loans if you repay it in full and on time.

 

Credit reference agencies like to see people spending on cards regularly so long as they manage their account responsibly. Making your payments on time each month can be a big help in building a better credit rating. But watch out, going rogue and missing payments or exceeding your limit could put lenders off giving your credit.

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