Getting Your Credit Back On Track: Our Practical Guide

If you are thinking of applying for credit, you will need to ensure that your credit score is in check. This means that if it needs work, you will need to find ways to get it back on track. To start with, it is crucial to understand the importance of your credit score. Essentially, it is a measure of how creditworthy you are based on a few different factors, which help to determine if you are a good candidate for credit. As a result, it can influence your ability to access loans, mortgages, mobile contracts, and more. Below you will find key steps to improving your credit score, as well as your financial future.

Check Your Credit Score

Firstly, it is important to check your credit score and look at the factors that are most affecting it. It is possible to find out what your credit score is through your bank or by going directly to one of the main credit reference agencies, including Equifax, Experian, and TransUnion. These agencies will provide you with a credit file online for free. Each agency uses a slightly different system and scale, but the higher the number of your credit score, the better it is. As a rule of thumb, it is best to check all three credit reports at least once a year, as they can all have an impact.

Consult With A Mortgage Advisor

Even if you find that your credit score isn’t great, there are other options you can explore so that you can secure a mortgage. For example, you may want to request the help of a bad credit mortgage advisor, such as MoneyNest. Borrowers with poor credit can still obtain loans through a range of specialised programmes. All you need to do is complete a brief form and you will be matched with a mortgage expert based on your unique circumstances. As a result, you will get expert advice and guidance throughout the whole process.

Pay Your Bills On Time

Missing fixed costs, such as rent, credit card payments, and other bills can damage your credit score. This can be a big red flag for many lenders, so it is crucial to show that you can keep up. If you are struggling, it may be useful to set up a more affordable payment plan with your creditors. Making a late payment due to circumstances beyond your control can be resolved as long as you make the payment promptly when you notice. Well-managed accounts can have a positive impact on your credit score.

Get A Credit-Builder Card

A credit-builder card is a great way to rebuild your credit score, if you use it for a small amount of spending each month. For example, you can use it on everyday essentials you would buy anyway. These types of cards typically have low spending limits and high interest rates. When you first get a credit-builder card, it might cause your credit score to drop. However, if used correctly, it will help you build your score over time. Then, remember to make your repayments in full and on time every month so that you don’t have to pay interest.

Keep Balances Low

Although it may not happen overnight, managing your money more effectively will make a big difference to your credit score. For example, it may be beneficial to keep your credit usage low so that lenders can see that you are on top of your finances and that you are far from overspending. If you reduce your overall usage to a third of your limit, you can boost your credit score. Also, make sure you pay off your purchases on the same day, instead of waiting till the end of the month.

Clear Existing Debts

Another crucial thing to do to fix your bad credit score is to pay off outstanding debt. When you are applying for a new loan or a credit card, your score will show it, if you haven’t been making repayments. Be sure to pay off any debts you have or set up a plan to start making instalments each month. To make the process easier, you may be able to shift the debt to a card with 0% Annual Percentage Rate (APR), so you don’t get interest. However, it is important to come up with a plan that gets you debt-free within the interest-free time period.

Evaluate Financial Ties

Taking out a financial product jointly with someone else will create a financial association. Therefore, if you have a financial association with someone who has a bad credit rating, this could have an impact on your credit score as well. Remember that splitting up with someone or moving house won’t necessarily take the financial association off your credit record. As a result, it is always worth checking your credit report to ensure information on financial associations is accurate. If you are no longer connected to someone, it is important to inform the credit reference agencies of your disassociation.

Check Your Report For Errors

At times, the information on your credit report may be inaccurate. This could be due to an error with your name or address, or because a bank has passed the wrong information to a credit reference agency. However, even the smallest mistake on your credit report can have a negative impact on your credit score and may affect your chances of getting the best credit deals. Therefore, if you identify an error on your credit report, it is important to dispute the information with the credit reference agency. You may also need to include documents to support your dispute.

Join The Electoral Roll

Joining the electoral roll is another easy way to improve your credit score. Once you register to vote, your electoral details will be recorded on your report, which can help lenders confirm your name and address. Ensure that your address is correct and avoid changing it too often to demonstrate that you are stable and settled. If you aren’t on the electoral roll or your details are incorrect, lenders will be unable to verify your identity and may refuse your application for credit. Keep in mind that registering for council tax or government benefits won’t automatically put you on the electoral roll, so you will have to sign up yourself.

Keep Old Accounts Open

It can be helpful to show lenders that you can successfully manage multiple credit accounts, particularly over a long period of time. As a result, you may be rewarded for having long-standing and mature credit accounts, especially if you have only used a small portion of your credit limit. This will also show that you have been a reliable borrower in the past. Depending on what the lender is looking for, cancelling a long-held card could put you at a disadvantage. For example, this may lower your score or decrease your chances of getting credit.

Limit Credit Applications

If you apply for credit frequently in a short amount of time, this can make lenders think that you are overly reliant on credit, which makes you a higher risk. Regardless of the type of application you submit or how much you are asking to borrow, each credit application is recorded on your report, which can be seen by companies. Therefore, it is important to space out credit applications for the best results. In general, it is advisable to make no more than one every three months. However, keep in mind that different lenders’ criteria will vary.