If you have been turned down for credit in the past or concerned that your credit score could affect you securing a financial product in the future, then don’t worry. There are steps you can take to improve your credit score and ultimately your creditworthiness. There isn’t a single score that a credit lender will use when assessing an application; the credit reference agencies use simple indicators that are based on the information on your credit file. Each lender will have their own system in place for deciding whether to lend money to you or not means you could be rejected by one but accepted by another. But, if you are concerned, then don’t worry as there are companies out there that offer loans for people with bad credit.
What is a Credit Score?
Your credit score is a number that credit reference agencies use to assess whether you are creditworthy or not. The score is based on the information that is found on your credit file. Each of the credit reference agencies hold a credit file on you. The list contains all financial records about you, including your past behaviour and how you have handled your finances. Although credit scores are useful for you as a borrower, credit lenders don’t actually see the exact score when you apply for credit products. Instead, lenders use their own algorithms and apply them to your credit data. These algorithms are kept secret, and nobody is allowed to know anything about them.
Cancel Any Credit Cards That You No Longer Use
Lenders will look at the amount you can borrow as part of their assessment. If you have a credit card with a limit of £2000 but haven’t spent any of it, then some lenders might think that you will spend it all in one go. If you are in the process of deciding which credit cards to cancel, it better to go for the ones that are newly open then any you have had for a while and used sensibly.
Pay Your Bills on Time
The best way of showing lenders that you can manage your finances responsibly is by paying your bills on time and in full. This is because they need to know that you can make regular payments. Regularly missing payments has a negative effect on your credit score, so it’s important to avoid doing so at all times. However, if you have missed payments in the past, but now manage your finances more responsibly, your credit score might still be affected but not as much as you think.
Register to Vote
Registering on the electoral roll is a way of increasing your chances of being accepted for credit product as lenders will use this information to check your name, address, and where you live. They will need to confirm these details before they offer you credit. So, if you are currently not registered to vote, then this could delay or result in your credit applications being rejected.
Limit Your Credit Applications
When you apply for too many credit products, this indicates to prospective lenders that you are struggling with money. When requesting a higher credit limit, a lender will request to see your credit score which will also leave a mark. Making fewer applications reduces the number of checks that are made on you, which will limit the negative impact on your score.
End Financial Links With Ex-Partners
Living with a partner or spouse that have a bad credit score won’t affect yours, but if you take out a joint financial product with them, then it will. For example, opening a joint current account will create a financial association between you and your partner or spouse. Lenders might then check their credit score as well as yours when assessing a credit application. If you have held a joint account with somebody that you are no longer with them, you need to ask the credit reference agency to break the financial link between them and you.
Keep Your Credit Usage to a Minimum
Lenders will not only look at your balances but also how much credit you have available at your fingertips. If the credit you have available is low, then lenders might consider this as a sign that you cannot manage your finances responsibly.