Infographic: Recovering From Poor Credit
A step-by-step debt management guide to better credit rating
A gleaming credit rating is vital in this modern age. You will need a good credit score to get a mortgage, loan or credit card but it is also used in other situations. An employer may check the health of your credit report, or a potential landlord could perform a search in order to determine whether or not you would make a suitable tenant.
Not everyone has a perfect rating, however, and you might find you have a less-than-favourable credit score for a number of reasons. You may have made hasty financial decisions, been late with a few loan repayments or even forgotten to pay them altogether. You might have just completed an Individual Voluntary Arrangement (IVA), which means that even though you are no longer in debt and the IVA will have been removed from your credit report, your rating isn’t a high as you would like it to be.
The good news is, there are always things that you can do to encourage an upward trend in your credit rating. By taking the right financial steps, you can ensure a solid financial future and enjoy all the resulting benefits of a good credit rating.
Get on the electoral register
Regardless of whether or not you are filled with the patriotic drive to vote, the reality is that being registered to exercise your right to do so has a very positive impact on your credit rating. Being registered provides reference agencies with proof of your address and identity, which means that you are considered a much safer prospect to lenders. Applications from those not on the electoral register are less likely to be accepted, as there is an increased risk that the loan application may be fraudulent.
Stop applying for credit
Having a range of credit cards can be a good thing, especially if you are a responsible individual who can effectively manage debt and money. It demonstrates that you are capable both of restraint and of reliable repayments. However, if you want to develop a good credit score, slow and steady is definitely the way forward. Don’t let an eagerness to build your credit rating get the better of you.
If you submit many applications at once, these applications will be visible to any creditors who perform a credit history search. If they see that you have filled out a large amount of applications over a relatively short period of time, it will be an indicator that you are desperate and therefore a risk. Instead, space out your applications and do substantial internet research. A fair few banks will give you an indication as to whether or not you are likely to be successful before you officially apply for a credit card.
Pay all existing credit card debt
The best thing for a healthy credit rating is to be reliable and prompt with your credit card repayments. Only borrow what you can afford to repay – in this respect, you should begin to treat your credit cards as debit cards. By doing so, you can afford to repay the full balance each month and you will slowly and steadily build up a great credit rating. If you are worried about forgetting to make payments, you can easily set up a direct debit to ensure automatic repayments each month.
If the only credit cards you can obtain are those with high-interest rates, don’t let yourself get scared off. If you reliably pay off your credit card debt each month, then you won’t incur any fees.
Check your credit report regularly
There are loads of credit rating myths flying around, one of which being that you can’t check your credit report negatively impacting your overall credit score. Thankfully, this is entirely untrue. In fact, if you are actively trying to improve your credit score, it is important that you regularly check your report to ensure that it is both up-to-date and accurate. It is only by being fully informed that you can promptly address any concerns or inaccuracies that may be present.
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