Whether it’s for a mortgage, the purchase of a car on finance, a business loan or phone contract, your credit score plays a key role in your application’s success.
Financial institutions use it to determine just how reliable a borrower you’re likely to be and ultimately make a decision as to whether to offer what you’re asking them to lend to you.
Each lender has their own criteria for credit and depending on the credit provider they use, the score may vary. If it’s not good enough and you have an element of bad credit, it can mean you are:
- Denied the finance you’re looking for
- Offered a higher interest rate
- Vulnerable to having your overall credit access limited
The problem is that incurring bad credit and reducing your score can be easily done, perhaps via a missed or late payment, having outstanding debt or just by having no credit record at all. Other more serious impacting factors include having County Court Judgements against your name, going bankrupt and having your home repossessed.
How to improve your credit
Should you have experienced any of the above credit blemishes, the tips below should help in improving your credit score so that you can get the loan you need.
- Pay off your debt: Credit card debt or an outstanding loan can affect your credit history. Paying these off as soon as possible will help in improving your score. Also consider registering on the electoral roll if you haven’t already.
- Limit your credit checks: Every time a hard check is done under your name it’s logged and visible to lenders. Multiple credit checks make lenders wary so try to limit how often you use credit to make a purchase, consider paying upfront instead and, if looking to compare mortgage rates, ask a lender to conduct quotation search rather than a more formal credit application.
- Meet your repayments: Repeated missed and late payments will reduce your score and signify unreliability to a lender. Setting up standing orders, ensuring there’s always enough money in your account to pay your bills and staying well within your credit limit will help to avoid that.
- Reduce credit cards and bank accounts: If you have multiple store cards, a few different credit cards, and several current accounts this can jeopardise your score, as can taking cash out on a credit card. Only use a debit card to withdraw money and close any cards and current accounts you no longer use.
- Reduce financial connections to others with bad credit: Should you have a joint bank account or mortgage with someone who has bad credit, this can negatively affect your individual score. If this is the case, consider separating your assets.
Some of these actions will see your score improved quite quickly whilst others will take a while to register. With that in mind, taking these steps as soon as possible will mean you’ll sooner be able to make the purchases you need.