Credit can be ideal for purchases when you don’t have cash available, but it’s important that we use it in the right way. More and more people are falling into debt because of multiple lines of credit which in turn can affect your credit score. This may not seem like anything major in the first instance, but having a bad credit score could stand in the way of purchasing a home, or even gaining employment.
If you have recently checked your credit score and have found it’s not the best it can be, fear not. Although there’s no magic wand when it comes to repairing your credit file, (and be mindful of anyone who says that there is) there are some steps that can be taken to improve your credit score moving forward.
Ensure You’re on The Electoral Roll
Proving where you live can be one of the most important aspects of improving your credit file. Think of it this way, would you borrow money to someone you won’t be able to track down? Ensuring you’re on the electoral roll is the easiest and most efficient way of proving where you live, improving your credit score in the process.
Take Control of Delinquent Accounts
For some people, it can be all or nothing when it comes to their credit file. This means that one late payment can often lead to other missed payments, with the assumption being that it makes no difference in the long run. While late payments are recorded, getting these up to date will fare much better than a default or County Court Judgement, which can stay on your credit file for six years.
Don’t Excessively Apply for Credit
When searching for a loan or credit card, some of us may not be happy with the APR or interest rate being applied, meaning that we often look to another provider for a more favourable deal. However, applying for numerous lines of credit leaves footprints on your credit file, which can be a red flag. While it may not be the case, it can be assumed that the numerous applications are being made as you are in financial difficulty, which can mean your credit score decreases as a result.
Set Up Payment Reminders
Depending on how many lines of credit we have, it can be difficult to remember each due date. However, if we fall into the habit of making late payments, this will be reflected on your credit file.
While it can be difficult to memorise every payment date, there are ways of ensuring that we meet the deadline. For some, it’s as simple as setting up a reminder on their calendar. You can also speak to the company directly and inquire as to whether some sort of text reminder service can be set up.
If all else fails, you could opt for specialist software or even a phone app that makes the budgeting of money easier.
Check for Mistakes
While for the most part, credit checks do provide accurate information about a person, that’s not to say that mistakes aren’t made. If you feel that you’re making payments on time and managing credit in a responsible way, it may be worthwhile checking your credit file for mistakes.
It could be that debt has been inaccurately listed, or there is some information that is not correct present on your file. To be able to dispute the entry, you will need to forward a letter to the company in question, stating why you feel the entry is incorrect.
Keep Your Credit Usage Low
As you would expect, part of your credit score is made up from how much you currently owe. However, many may not know that the amount of credit they have left can also affect the score. While it may seem unfair, the assumption can be that those with a low credit availability are struggling, and so any further credit may be refused.
Disassociate Yourself from Adverse Accounts
While our own actions can have a detrimental effect on your credit score, so too can the actions of others. If you’ve ever held a joint account with a former partner or spouse, then their financial dealings could hold ramifications for you. How you remove your name from the account will depend on the type of account it is, and which company runs the account. In most instances, there will be a form that needs to be completed.
If you’re unsure as to whether you’re still connected to a joint account, then it could be worthwhile checking your credit report to see if any entries relate to accounts that may relate to an ex-partner.
You May Need to “Create” a Credit Score
It’s easy to assume that many have a low credit score as they aren’t too good at managing money, but this isn’t always the case. In some instances, some people may not have taken credit out at all, which can mean that your credit file is essentially blank. As there is no record, this can mean that many lenders will not know how risky you are as a customer, so may decline the application.
If you’re looking to build and maintain a credit file, there are some things you can do. As well as ensuring your details are correct and you’re on the electoral roll, you can also look at taking out small forms of credit.
You may not realise it, but even a mobile phone contract can help create a credit file, and if maintained in the right way, can help increase your credit score over time.
There’s no real way of knowing what contributes to your credit score. For example, there may be instances where our income can be a deciding factor, or how long we’ve been in gainful employment. As such, there can be aspects that are beyond our control, but if we’re able to make payments on time and sustain favourable relationships with lenders, then there’s little reason as to why your credit score won’t improve over time.