How to Improve Credit Rating?

Wednesday, May 16th, 2018 Money


In this post, we look at the way a credit rating can affect your ability to apply for finance as well as ways on how you can your improve credit rating.

What is a credit score?

A credit score or rating is a valuation of how desirable you are to lend to. It is used help determine how likely you are to be able to make repayments. A better score is seen as lower risk mean lenders are more likely to lend to you.

Why is a good credit score important?

Having a good credit score will help you secure better mortgages, loans and credit cards. Loans are a part of most peoples lives, think mortgages, car finance and credit cards. Even if you have not used any finance previously, it is good to build up a good credit rating in-case you require access to finance at a later date.

What if I have a bad score?

Not all lenders use the same calculation to determine your credit rating – even if you were turned down by one lender, another may still be able to help. It is vital you understand the reasons why you. Please be aware however that multiple credit searches in a short amount of time can have a negative impact and be viewed unfavorably by lenders.

What affects my credit rating?

There are a number of factors that can impact your credit rating:

Credit card usage & debt – Having a lot of debt can cause you to have a lower score. Lenders will view higher debt negatively as this is an additional commitment you must repay.

Credit searches – running multiple credit score searches in a month can be viewed negatively by lenders.

Electoral roll name and address. This is important for example if you move house and forget to update your electoral address. Additionally, if changing your name after marrying or through deed poll, you should ensure your update your electoral register as well.

How to improve credit rating?

Ensure that you have updated your electoral details if different or not registered.

Review your credit score regularly to ensure your details are correct as well as to highlight any issues. Experian allow you to run a free report to view your credit rating based on their formula. Experian are used by a number of lenders to determine your score.

Don’t default on payments making sure you pay at least the minimum repayment amount each month.

Close any unused credit accounts. Access to additional finance can be viewed negatively by lenders.

 

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