Having a bad credit score can often feel like a heavy burden you’re never going to lift. However, while it may not happen overnight, we’re here to tell you that there are plenty of ways in which you can transform your credit score. Providing you’re patient and prepared to follow the 7 steps outlined in this guide, there’s no reason why you can’t achieve an excellent credit score.
Before you can attempt to rebuild your credit score, the first step is to understand where the issues lie. Make sure you’ve got an up to date copy of your credit profile to work with, as the information on your credit report is what determines your credit score. You can receive a free copy of your credit report from each of the three main credit bureaus, Experian, TransUnion and Equifax. It’s worth requesting a copy from each as you can compare the information listed on each report to ensure there are no errors. Which leads nicely onto our second tip.
If you do spot something on your credit report which you think may be incorrect, you have the right to dispute the error by contacting the credit bureau who listed the error on your report. While it may only seem like something small, it can have a big impact on your credit score and removing something like an inaccurately reported late payment could significantly improve your credit score.
One of the criteria lenders look at when performing a credit check on your profile, is your ability to make your payments on time. Therefore, ensuring you always keep on top of your payments will help to improve your credit score. And this doesn’t just refer to your loan repayments, it also includes any outstanding bills like rent, phone bills, utilities etc. If you have difficulty remembering when your payments are due, it’s a good idea to set up direct debits, this way you can be sure everything is being taken care of.
Lenders like to see proof that you pay back the money you borrow. Therefore, having no credit history can negatively affect your credit score, as you are essentially a risk to lend to. A good way to demonstrate your credit management ability is to apply for a credit card and use it responsibly, borrowing small amounts and paying it back in plenty of time. However, be aware that when applying for a credit card, you will see a dip in your credit score initially. But use it responsibly as we’ve advised, and it will benefit you in the long-term!
If you make multiple credit applications within a short period of time this can be damaging to your credit score as you can appear “credit hungry”. If lenders think you are desperate for credit this will raise alarm bells as it will suggest you’re in an unstable position financially. The number of credit requests listed on your report contributes to ten percent of your overall credit score, so make sure you’re aware of how many applications you make.
When you’re registered to the electoral roll, your electoral details are recorded on your credit report. This provides confirmation to lenders of your name and address, and therefore works favourably towards your credit score. As a side bonus, registering to the electoral can save you time on your credit applications as lenders may request other forms of identification and proof of address which may delay your application.
If you have already taken out a credit agreement and you’re genuinely struggling to make the repayments, you don’t have to let yourself run into debt. The best thing you can do is contact your lender and be honest with them about your situation. In most cases they can help you by either reducing your payments, or sometimes even suspending them entirely until you are in a more stable position. Alternatively, you can contact a Credit Advice Bureau, who offer free support to individuals struggling with their finances.
By seeking help, your lender will be far more willing to help you with a solution, however if don’t and you default on your loan this will have an extremely negative impact on your credit score.
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