Many borrowers rely on credit providers for financial assistance when times are hard. Obtaining credit, however, requires a good credit history, which individuals build over time through borrowing and the way they repay their debt. Credits such as loans, mortgages, bank overdrafts, credit cards and even mobile phone contracts all require a credit check before lenders can offer them. And the amount given has a direct correlation with the credit score would-be lenders get on an individual.
Adverse credit deeply affects the likelihood of obtaining much needed credit so it is sensible to examine the current state of your finances and tidy up any mess that may be affecting the growth of a good credit history.
Conduct a Regular Credit History Search
Before improving a credit score, it is essential to have an accurate picture of your financial situation. This will provide a better idea of what aspects of your finances need repairing and what need to be totally eradicated. The best way to do this is to request an individual credit report from a credit reference agency that compiles information on consumers’ finances, their outstanding debt as well as their borrowing and customer behaviour. This information is what prospective lenders view before scoring a customer and deciding whether to accept or reject their application for credit. So the cleaner the credit report, the higher the chances of obtaining credit.
De-Clutter Existing Debts
Having an exceptionally high amount of debt in one place can sometimes be a bad choice and will take an incredibly long time to pay off. To help increase credit rating, it may be worthwhile to take advantage of balance transfer offers available and spread the debt across two or three credit cards to make it more manageable. The easiest way to find out about the best balance transfer deals available is by calling the credit card issuer to whom the debt is to be transferred. Very often, credit providers have special offers available to individual customers but do not always communicate this to them.
When doing a balance transfer, opt for the transfer option that will yield the best long-term gain. For example, a balance transfer deal that offers a 5.9% APR for the life of the balance and no handling fee may be more beneficial than one that offers 0% interest for a specified period of time (say six, nine or 12 months) but then charges a one-off fee of about 2.5 - 3% of the total balance being transferred. So it’s best to weigh out the most profitable deal according to the level of debt and how much you can afford to repay each month. Transferring debts responsibly means that repayments can be better controlled and managed because interest rates are normally much less than the extortionate rates of up to 39.9% APR that apply to credit card purchases.
Other Ways of Improving and Maintaining Good Credit Score
Register to vote – being on the electoral roll may seem neither here nor there when it comes to a credit application but it is very important.
Time applications correctly – timing credit applications may help to avoid the rejection spiral and improve chances of being accepted for credit.
Keep individual finances separate – married or cohabiting couples who put their finances together need to be careful not to hurt each other’s records. Combining finances or being financially linked through joint accounts or bills with a partner who has adverse credit will cause more harm to a good credit record than do any good to a bad one. Thinking that by linking finances a bad credit record might be improved is merely a misconception as couples are normally co-scored and bad borrowing behaviour is always taken into account.
Pay off existing debts – lenders are more reluctant to provide credit to someone with a huge outstanding debt. Reduce the level of debt first before thinking of applying for more. This is seen as good borrowing behaviour and is helpful in repairing adverse credit ratings.
Close unused accounts and credit cards – leaving bank accounts empty and unused does not do any good to an improving credit record. Cancel any unwanted credit cards and close all unneeded accounts which may be affecting the likelihood of good credit.
Avoid Accumulating More Debt
Although this may sometimes be easier said than done, it is in actual fact possible. And even though it can be very tempting to accept the enticing offers that prospective lenders and credit providers throw in the way of their customers, accumulating more debt can be harmful to a good credit history. So steer clear of borrowing until existing debts have been cleared or significantly reduced.