Five Tips To Improve Your Credit Score

Once upon a time, if you wanted to take out a loan, you went to your bank and became best friends with your bank manager. You demonstrated how much you earned, made an assessment of your outgoings, reassured the person making the decision that you were good for the repayments, and that was that. Give a good account of yourself, and it was likely you’d get the money you asked for.

The internet, and the modern age in general, has put an end to all that. Now, everything comes down to your credit score. You might be earning six figures and have outgoings that don’t even come to half of your income, but if your credit score doesn’t stack up, you’re going to struggle to find a bank or a financial institution willing to lend you a penny.

Why Does It Matter?

The major implications of poor credit are obvious. It can stop you from getting a mortgage and owning your own home. Someone with poor credit will either struggle to get low rate credit cards or loans, or be restricted to those which charge high rates of interest because you’re viewed as a risk. Even if you can find a line of credit, chances are your maximum borrowing will be severely restricted when compared to someone who banks view as a better bet.

Speaking of betting, that’s a minor consequence that could be impacted. Some gambling companies and websites refuse to open accounts for people who have a poor credit history. Policies vary from company to company, but if you’re someone who enjoys a gamble, you could lose out on the fun if you’ve got missed credit installments on your record. Some websites, like don’t undertake credit checks on their members, and so you’re free to play their online slots like Cleopatra. Ladbrokes, Paddy Power and Betfair, by contrast, will do a deep check before letting you take to the tables or even bet on your favorite sports team. It’s not just betting either; store cards and even mobile phone contracts could be off limits to you if your credit score is particularly bad.

How To Make It Better

If you have poor credit history, it’s not a problem that’s going to resolve itself overnight. Building your credit history back up will take time and effort, but it can be done. Here are the actions you need to take to either open up the doors that have been closed to you, or keep the existing ones open.

1. Pay On Time

If you don’t pay your major credit commitments by Direct Debit already, start doing so. Your creditors may not complain too much if you manually pay them late by a few days, but even that small delay can be reflected as a late payment on your credit file. Late payments tell potential lenders that you’re struggling to keep up with the amounts you owe, and so you’re a bad bet to take on any more lending. If you have no reason to pay late other than forgetting when your payments are due, you’re doing yourself no favors. Set reminders on your calendar to make sure you’re always paying on or before the date when amounts become due.

  1. Keep Balances LowWhen we work out our finances for the month, it can be tempting to make the minimum payments on credit cards, and have more money for ourselves to spend on the things we like. Doing that once or twice isn’t so bad as long as you’re making that minimum payment on time, but making a habit out of it isn’t advisable. Having large balances owing, and only making the minimum payment against them, is another sign to lenders that you can’t afford to make meaningful repayments against your existing debt balance. It also tells them that if they lend you a significant amount of money, you’re going to take a very long time to pay them back. That isn’t a great deal for them, and so they’ll be reluctant to lend.3. Don’t Give Up On Bad AccountsThe longer ago your poor credit was, the less it matters in terms of how lenders assess you. That means it’s never a good idea to give up on a credit account just because you’ve missed a few payments. Even if your credit line has been terminated with them and the account has been passed to a collection agency, it’s still in your interests to pay it off when you can instead of letting it fester. If the account is paid off, your credit record will show that you had difficulty in the past and then recovered. If it remains outstanding, it will show that you got into credit difficulty and still struggling. Even if your debt is years old, pay it off.4. Don’t Scramble For Credit

    As well as assessing your current outstanding balances and payment history, potential lenders will also look at applications you’ve made for credit. Every credit application you make leaves a ‘footprint’ on your credit file. If you have several ‘footprints’ in a short space of time, it sends the message that you’re currently desperate for credit, and you’re trying to get it from anywhere you can. To a lender, that suggests a person is in financial difficulty and using credit to pay their way out of it. If you’ve applied for credit somewhere and been rejected, think carefully before applying somewhere else in a short space of time unless you desperately need the money. You might be doing more harm than good.

    5. Don’t Move Debt Around

    Some people will build up a credit card balance, and then take out a new credit card with a 0% balance transfer offer to pay it off. It saves money on monthly repayments because the interest on the repayments is removed, and it can feel like a clever trick. It can also put lenders off loaning credit to you. Lenders are intelligent; if they can see that a large balance disappears from one account and reappears on another, they know what’s happened. It tells them that firstly you’re not actually reducing their debt levels, and secondly they’re unlikely to make any interest payments back if they lend money to you. Given that interest is how loan and credit card companies make their profit, giving them the impression they won’t get any removes any incentive for them to lend money to you.