Bad credit can have a negative effect on your finances. If you have a bad credit, you will not get approved for loans, mortgages or you will notice that you have to pay higher rates than others. A poor credit can potentially cost you thousands over the course of a long time, it can also use you stress and embarrassment. Fortunately, there is a way out of this. Improve your credit score. Improving your credit score is a bit like losing some weight. It doesn’t happen immediately, it takes time, effort and consistency. But the result is worth it.
Use these 3 steps to improve your credit score:
Make Sure your Reports are Accurate
The first step improving your credit score is to verify that your credit information is actually correct. You can find this out by checking your own credit reports. You can view your credit report for free on a trial basis or by paying a small fee for the complete report to be sent to you. The three main credit reference agencies (CRA) in the UK are Experian, Equifax and CallCredit. Each of them has a file with your credit report although the information contained might differ from one to the other. Once you have your report, use this quick checklist to verify that everything is in order:
- Is all of your information contained in the report accurate, such as your full name, address and national insurance number (NINO)?
- Are all of your credit record and accounts recorded?
- Are there any discrepancy is payments you made and payments recorded?
- Are there any accounts or credit applications you don’t recognize?
- Are there are old records present that shouldn’t be?
Keep in mind that a credit record from one CRA might contain errors while others will not which is why it is a good idea to get records from all three. If you find any error in your credit report, then you need to immediately contact the CRA where you found the error and open a dispute where they will check your claims and correct the errors if it is their fault. It is important to file a dispute immediately you discover an error so that it can be corrected as soon as possible. If you don’t have any errors in your records, then you can move on to the next step.
Identify where you need to Improve
Whether you found an error in your credit records or not doesn’t solve the problem of bad credit score, it only helps you identify and eliminate possible causes for your bad credit score. Apart from errors, a whole lot of other factors can be causing your bad credit score and you need to identify them and know where to improve from. Some of these factors are:
- Payment History: If you have a history of being back on your payments, creditors and lenders see you as a bigger risk and this can have an effect on your credit score.
- Age of Accounts: If your credit account is new, then you should not expect to see a high score as there is little or no data to rate you with.
- Credit Applications: If you have a large list of credit applications, creditors will wonder why and begin to fear that you are overextended financially. This will have an effect on your credit score.
Looking at all of these factors holistically, you will be able to identify areas you need to work on to improve your credit score.
Setup a Credit Plan
Closing an account will not make a late payment or bad score go away. Making your credit payments commitments when they are due is one of the biggest and fastest ways to get your credit score back up there. Some banks and credit providers offer reminders through emails or text messages, but asides from that, create your own personalized reminder system that will alert you when your payment due date is close. You can also subscribe to an automatic payment system with your credit company so that your payments are automatically debited from your bank account on the due date. If you have a prior record of prompt payments, you can engage with your credit company and negotiate with them to forgive your late payment. Bear in mind that credit companies are generally lenient with customers who have a long standing record of making payments on time.
Improving your credit score involves intentional conscious effort. You will need to adjust your spending, which means being less in a hurry to make new purchases unless you are absolutely sure that you can pay for them.
Follow these few steps and watch your credit score build up slowly but surely.