Thursday, June 08, 2023

5 Top Tips To Rebuild A Bad Credit Score


Your credit score is a really important aspect of your financial life and having a low score can affect your finances in many ways. Not only will it affect the ability to get approved for bad credit car loans, mortgages, credit cards and even mobile phone contracts but it can also affect the interest rate you are offered too. A higher interest rate means it is more expensive to borrow money and lenders usually set higher rates when you have bad credit to help secure the deal. A lower credit score usually means you are more likely to default on your future finances due to your past behaviours. So, if you find yourself with a bad credit score and are wondering how to fix it, the guide below has been designed with you in mind!

How do you get a bad credit score?

There are a number of ways in which you could find yourself with a bad credit score. Most people know where they’ve went wrong over the years when handling their credit or finance but there are some factors that affect your score that you may not know.

  • Missed or late repayments on credit agreements.
  • Being declared bankrupt.
  • No previous borrowing history.
  • Being the victim of fraud.
  • Having a default or CCJ on your credit report.
  • Only paying the minimum on a credit card.

How to improve your credit score:

Unfortunately, there’s no quick fix when it comes to credit scores and it will take time to build better financial habits but once you do, the benefits are endless.

Stop applying for credit

If you already have a low credit score, the first thing you should do is stop applying for anymore finance or credit. If you’re desperate for credit, it may be tempting to apply with all lenders to see who will accept you, but you can be harming your credit score in the process. Making multiple applications for finance in a short space of time can have a negative impact on your score because each time you will have a credit check performed on your report. It can be worth checking your eligibility for finance first before you start applying.

Reduce any existing debt

Your credit score takes into account how much you currently owe and the amount of debt you have with lenders. It can be a good idea to reduce any existing debt you owe to help improve your credit score. Not only will it help your score, but it will also help you to save money as you’ll be financially better off once you clear some debt. If you’re paying off credit card debt, you should always pay more than the minimum monthly requirement to help get rid of debt as fast as you can.

Make payments on time

One of the best ways to create new financial habits is to keep on top of all your current repayments. Making payments on time and in full is an easy way to show future lenders that you can be trusted to handle credit responsibly and also improves your score along the way. If it helps, you can set up direct debits to automatically collect the money, so you don’t have to worry about remembering payment deadlines.

Check your credit report

Your credit report holds a whole range of information about your financial life and your ability to meet repayments. It also lists personal information about you such as name, current address, previous address, and date of birth. It’s important that all of the information listed on your credit report is accurate and up to date. Misinformation on your file can be negatively harming your score ad if the information doesn’t match what you put on an application for finance, lenders may be worried that it’s a fraudulent application in your name. If you wish to make any changes to your credit report, you can contact the credit agency who provided your report.

Keep credit usage low

When you’re trying to improve a low credit score, you should try to keep your credit usage as low as possible. The credit utilisation ratio is really important, and it offers advice around how much of your available credit you should be using. You should try to use around 50% of your available credit limit and if you really want to excel your finance, only use around 30% For example, if your credit card limit was £1000, you should only use around £300 of the available limit and pay it off each month.

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