Having access to finance when you need it can make life much easier, whether you are hoping to get a mortgage, buying a new car or simply want to borrow some money to pay for a major expense, such as a wedding.
However, if you don’t have a perfect credit record you will probably find that getting approved is more difficult now than it ever was before. And you don’t even need to have experienced horrendous problems such as bankruptcy to be affected; simply missing a few payments or being late on a number of occasions, could be enough to get a lender to view your application with extreme caution.
To some extent this is not surprising, having problems meeting your existing obligations can be a sign that you are having difficulties managing debt and borrowing more money simply wouldn’t be a good idea.
Fixing your finances
If you are experiencing financial problems, the first thing you should do is get some debt advice and credit recommendations. Before you even consider trying to get your record in good shape, you need to make sure your finances are manageable; otherwise you will simply run into problems again.
However, you might not have financial difficulties as sometimes late or missed payments are simply due to bad organisation rather than money woes, particularly if you don’t pay by direct debit. Having the time to go into the bank or give the lender a call to make a payment, can sometimes be the last thing on your to-do list.
Unfortunately, whatever the reason you have notched up a few black marks on your credit file, you need to take some action to improve your score.
Improving your credit score
The simplest thing you can do, which will add valuable points, is to ensure that you are on the electoral roll. Constant change makes lenders nervous so signs of stability, such as registering on the electoral roll, help to provide reassurance that you intend on sticking around.
You can also check your own credit report online to make sure there is no misleading or inaccurate information. If you do find any out of date or incorrect information, you can ask for it to be amended, which will instantly boost your score.
However, making sure you are on the electoral roll and checking for errors is just the beginning of getting an improved credit profile.
Some people believe that having no outstanding credit will help to boost their score but, in reality, this can have the opposite effect.
Lenders like to see that you pay off what you owe regularly and without any problems, so actually having a little bit of finance can be a big help.
Building your credit rating
If you don’t have any need for finance right now but need to up your score, it might be worth taking out a card that you can use and pay off in full every month. This takes real discipline and is not recommended if you know you will simply use it to splurge, but if you have the will to stick to what you planned, it can help steadily build a profile of an individual who uses their card but is never late with payment. If you are late with a payment or miss one, it will undo all of your good work!
It is unadvisable to take out a Payday Loan if you want to improve your credit score as this type of borrowing is normally used by people with cash flow problems so could negatively affect your credit rating.
Since the near collapse of the banking industry and the double dip recession, lenders are much more wary about lending money and have put strict criteria in place, to ensure no loans are granted unless the credit score is exemplary.
Dealing with debt to improve your credit rating
If you’re struggling with your debt repayments and this is why you now have a less than perfect credit rating, you should focus on clearing your debts. There are specialist companies like Baines & Ernst who can help you to consolidate repayments and clear debts with affordable solutions such as Debt Management Plans and IVAs.
While it is important to remember that these solutions will affect your credit rating in the medium term because you’re repaying your debts at a reduced rate, you are working towards getting rid of your debts, and once these are behind you, you’ll be able to start rebuilding your credit rating again.