Guest Post: Understanding Your Credit Score and Improving It
Applying for a loan in any form, be it a personal loan, credit card or even a mortgage can be a lengthy process even in the best of times. Before you actually get to the application itself, you need to work out how much you want to borrow, what you can afford to pay back in terms of interest and of course, find the best possible interest rate.
When you reach the point where you’re about to find out if your application for a loan has been accepted, you might begin to worry about whether or not your credit rating is good enough to help you get what you need. Credit ratings play a huge role in determining whether lenders decide to give money to customers, but what are they and how, if at all, can they be altered?
Where Credit’s Due…
In simple terms, your credit rating is a statistic which helps to determine whether or not you’re deemed eligible to take out any form of loan. It’s determined by a number of factors, the main ones being:
- Late or missed bill payments
- Poor financial management
- Multiple failed credit applications
- Having too many open bank or building society accounts
- Not having a history of financial responsibility
- Large levels of unmanageable debts
If your financial circumstances mean that you tick at least some of those boxes above, then it’s likely that you may have a poor credit score. Thankfully, if you need to apply for credit at some point at the future, it’s possible to improve your rating, and all it might take is a little sound financial management and a degree of self-control.
Top Tips For Improvement
There are certain things which lenders, not to mention the three main credit rating agencies which handle all ratings data (Experian, Call Credit and Equifax) will take note of when trying to do your best to boost your credit score. Here are some top tips you might want to use:
- Live within your means. Trying to stay within budget every month in this day and age might seem like a thankless task, but scrimping and saving can boost your credit rating
- Use a credit card. If you get a new one and use it responsibly, then you’re showing lenders you can be trusted with their money
- Repay any debts you might have. It doesn’t have to be in one go, but by chipping away at your arrears, you’ll show that you’re trying to get on top of your personal finances
- Open a savings account and make regular deposits. Again, you don’t have to spend a lot, but if you’re saving, you’re proving to lenders that you can be prudent and show good financial management.
“Set up a regular savings account and shop around to make sure you get the best rate. Ensure that you are on the electoral roll as this can improve your credit score. Review your day-to-day spending to see if you can make any cuts to increase you’re saving, then set up a budget for essentials and stick to it,” commented a spokesperson from Yorkshire Building Society.Tags: Credit Score, Equifax, Experian