There are many ways to build your credit score rating. Some are more obvious than others. Underneath are 10 ways that you can start to turn that credit frown upside down.
Register to vote
Before even getting to credit cards, you should make sure you are on the electoral register. This will store your public information such as name, date of birth and address of residence. Of course, you will have to sign up to the electoral register in order to vote in any elections that take place in the United Kingdom. Click here to register.
Being on the electoral register will reinforce the legitimacy of your ability to claim credit.
Score checking
Experian allows you to do a free check of your credit score. Even if you have never used credit before, Experion will be able to give you an accurate portrayal of where you are currently at with your credit score. This will help you when deciding which credit cards or initiatives to make a move for, forecasting what you should and should not be eligible for.
Keep on top of payments
The most obvious way to build your credit score is to make sure that you keep on top of any current credit payments that you have made. This means you must keep repaying monthly amounts at a sustainable rate, without fail, and paying the required interest on top of that.
If you cannot keep on top of payments then lenders are not likely to support you with credit. You have to remember that those offering credit want to make money from you and, if they don’t think they are going to do that, they will not be too open to accepting your proposals.
Credit building cards
A credit building credit card can help to counter your credit problems. Banks such as Barclays will give you the opportunity to boost your credit score. These cards will reduce your interest rate over the first two years; some cards will only ask you to repay the amount that you borrowed by making the minimum payment each month.
However, we don’t recommend to only pay the minimum payment. We suggest borrowing what you can afford to repay and repay the whole amount each month. This will show that you can afford what you borrow.
You can improve your credit rating steadily over time by following the rules set by these cards. This means staying within the credit limit and making those monthly repayments. However, a failure to keep up-to-date with your arrangement and you could harm your credit rating.
We advise you to keep your credit utilisation and borrowing below 50% of your available balance.
Limit number of applications
If you apply for too many credit schemes and you get rejected for them, it can look bad on your record. It makes sense to use free eligibility calculators, where possible, to make accurate predictions as to whether you will get the scheme or not.
Cancel unused credit cards
Access to too much credit can be a problem. Access to too much credit can prevent a credit application from going through because you might look like you are needlessly and excessively borrowing more than you need.
Long-standing accounts that illustrate good credit should be kept because this will appeal to lenders. The key is to cancel credit cards that you do not use in order to free up more credit. Only you will be able to decide which cards to cancel and which cards to keep.
Avoid payday loans
Payday loans are very expensive to pay back and they illustrate a sense of desperation from the lender. Mortgage lenders have openly declared that they will refuse mortgages for people who have acquired a payday loan in the past. They see it as an example of poor money management.
If you have previously borrowed a payday loan such as Amigo – you may be entitled to reclaim some compensation. Make sure that you do your research into the payday loan company that you had previously used, if applicable.
Better credit cards
Once you have built your credit score up on credit builder cards, you might be eligible for some of the better credit cards that are available. Credit cards which require a higher level of responsibility will also yield more merit. This will allow you to gain rewards whilst building your credit score more quickly.
Usually these credit cards have a lower interest rate. Most credit card builders are classed as sublime credit (meaning the interest is high) as the risk of borrowing/defaulting will be higher with poor credit.
Hold off timing
If you have just finished a debt solution such as an Individual Voluntary Arrangement (IVA) or a Debt Relief Order (DRO), it would be advisable to wait a while before jumping into a credit fixing solution for yourself. Check your credit file to see when these debt solutions will be cleared; if it is due to be taken off your credit file in the not too distant future then it might make sense to wait until the situation has cleared itself.
In most cases, if you have been in an IVA then this would drop off your credit file, 6 years after the day that you entered into this arrangement.
Fight unfair criticisms
If you find unfair defaults on your credit report, you should look to sort those out as soon as you possibly can. Check if these defaults are recorded on credit reference agency reports. Errors can simply be administrative errors or they could be a result of a company that you have had an issue with in the past.
