It can be disheartening when your current credit score is lower than expected and you have financial goals you want to meet. If because of poor money management in the past you have a bad credit rating, or you simply have a lack of credit history causing a low score, this may stop you from applying for many different types of credit. From loans to mortgages, and even a mobile phone contract, your poor credit score will prevent you from finding what you need. So, how can you rectify this? You’ll need to start putting into action ways to build up your credit rating again, so here are a few ways to get started.
You’ll Need Affordability
When working with a low credit rating, this can take time to increase, so if you require money quickly, there are lenders willing to help despite a less than perfect score. If say the unexpected happens such as an emergency bill, you may only have a short time to resolve it. If this situation occurs, you’ll need to ensure you have the affordability so you can prove you are a suitable applicant to a payday loans no credit check lender. They will determine your current affordability so that even with a less than perfect credit rating, there’s a chance you may find the funds you need.
Review Your Full Credit Report
With a low credit score, you’ll want to find out the reasons for this. You may have a good idea why, such as having missed repayments in the past, but the reason checking your full report is worthwhile is because the Credit Reference Agency (CRA) will highlight areas you need to work on. You may even be able to boost your score with a few updates such as having the correct address history or removing any mistakes on now-defunct accounts (although you will need to prove this). If your report highlights you have outstanding arrears as one of the negative factors, you should prioritise resolving this as soon as possible by talking to your lenders and agreeing on a repayment plan if you cannot clear in full. Understanding your score will also help you to avoid these negative factors in future.
Increase Your Available Credit
An area where credit reference agencies will reduce your score is in relation to the amount of available credit you have, or credit utilization. If, for example, you have a credit card with a £3,000 limit and an overdraft facility of £1000, the more the balances are used, the smaller your available credit. If they are maxed out, for example, then you will have no available credit. This will indicate to the CRA you are more at risk and potential lenders will see this too. Ideally, your credit utilization needs to be no more than 30%, leaving plenty of available credit so you are not so reliant on further borrowing in future. So, if you currently have lending products that have used most of the credit limit, work on reducing this where you can, and you’ll start to see your credit rating improve.
Once you identify the reasons for your low credit rating, you can start to rectify by putting a plan of action in place. If you have no history of credit, you’ll want to look into building this up by doing things as simple as opening a bank account and arranging a small overdraft facility that you can maintain. Work on reducing any balances you have outstanding, as well as clearing any existing arrears, and you’ll start to see improvements. There are still lenders able to help in an emergency with bad credit if you have no better options such as savings. Work on your credit rating today and you can look forward to a better credit future.