Monday, 29 October 2018

How To Increase Your Credit Rating

It is worth knowing that having no credit rating at all is a lot worse than having a really low credit rating. You need a credit rating to show that you are able to pay back on what you borrow. The higher the score, the higher the trust of you paying it back. The lower the score, the likelihood is that it will be a straight no answer on the spot, no doubt about it. This is in terms of taking out loans, credit cards, getting a mortage, taking out finance on a car, store credit or even paying a monthly mobile phone bill, the possibilities are endless.

My credit rating has not always been squeaky clean, you could even say I probably hit rock bottom on my credit rating when I was younger. I was quite naive when it came to borrowing money or taking out phone contracts, especially when I was in college and living off £30 EMA money from college a month. It probably didn't help that I had an overdraft at University and even took out a £500 student credit card which I spent without even thinking about it. Not paying these off can severely affect your credit rating and can affect your trust score for borrowing down the line.

What is a credit score?
A credit score, also known as a credit rating, is a number that reflects the likelihood of you paying credit back. Lenders like banks and credit card companies will look at your credit history when they calculate your credit score, which will show them the level of risk in lending to you. The higher your credit rating, the better your chances of being accepted for credit, at the best rates.

Who should I use to check my credit score?
The company that I use that have helped me massively is Experian, it is free and easy to use! However, they do have an upgrade option of £14.99 a month; this allows you to view your credit reports in depth to see the positives of what is increasing your credit rating and comparing the negatives of what is decreasing your credit rating. It shows you what you need to work on and where you may be going wrong.

What happens when my credit score increases?
As I briefly outlined above, the higher your credit score, the more chance you have of being to obtain credit. It allows you to find the best details for your situation and the higher your credit, the better the offers you will get in term of loans, insurance, mortgages, etc. It allows you to take note of the financial decisions you make and help you budget your more a little bit better than you would have done.

What I found really helpful with Experian is the option they give you to enter your ID and passport details, as they will store this information and will search the web for any fraudulant activity that maybe happening with someone using your details, which is also a big negative factor when it comes to your credit, as frauds will spend or take out a lot of money, making expensive purchases or taking credit out using your details, so it's always good to keep your information safe - as it is never passed onto 3rd parties without your permission.

Some examples of what can affect your credit rating:
  • Not paying a bill on time.
  • Not being registered on the electoral roll.
  • Late payments on loans/overdrafts/finance.
  • Any hard searches for credit on your accounts.
  • A financial connection with someone with bad credit.
  • Bad credit from previous addresses - can take 6 years to clear.

These should be taken into consideration when trying to increase your credit rating. I ticked quite a few off this list when I was younger and still have a year to go from a previous bad credit! Hopefully once that is cleared, my score will be gleaming. It is definitely something everyone should look into and should be something that is taught in schools because I was frivelous with money and didn't have a care in the world and now I regret being so care free and niave. 

Hopefully this is something everyone will take a look into and care for their financial health.

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