Lenders will be making a judgement on how risky it is to lend you money. By having a detailed credit history.
Credit agencies need to be able to contact you if things go wrong and you miss re-payment dates .
The best way that you can prove to a lender that you will not be a high-risk customer, is to show them .
How to improve your credit score
Whether it be a potential high-cost investment or a short-term application for finance, many of us are faced with the burden of our credit history, when applying for finance. Staying on our records for 6 years, problematic spending patterns of the past can return to haunt us when we need finance the most. For many, the assumption is that our credit history is something that we must live with and have no control over. However, there are ways in which we can improve how our past financial situation is viewed by future lenders, and get a better deal on applications for finance. Below are our tips for improving your credit score.
The best way that you can prove to a lender that you will not be a high-risk customer, is to show them that you have re-paid previous credit accounts on time, or before they are due. If you have a credit card or another short term loan, consider paying this off early to improve your credit score.
Be wary of too many requests for credit
Each time you apply for credit, a notification appears on your report. Potential lenders may view this negatively as your financial position can appear desperate; you are portrayed as a high-risk borrower. When you need financial assistance, consider how many applications you are making and try to apply to a company and agreement that you are confident will be accepted.
Check the electoral register
Credit agencies need to be able to contact you if things go wrong and you miss re-payment dates. One way in which you can prove to a lender that you are worth lending money too, is to check you are on the electoral register (registered to vote). This gives the lender peace of mind, and prevents them from worrying about having to search the world for someone who owes them money! In addition, it is also important to check that all of the bills that you pay are addressed correctly as this will also impact on your credit score. Once more, credit agencies want to be able to see that you are responsible for making payments at your home address. Giving a separate address could make your whereabouts more difficult to track, creating potential problems for future lenders.
Rectify mistakes on your report
Mistakes do happen and it is possible that your credit report has incorrect details. Obtain a copy of your credit report (at the time of writing, many credit agencies offer free credit checks), to ensure that your report is correct. If it is not, demand that this be immediately rectified.
Build a substantial credit history
Lenders will be making a judgement on how risky it is to lend you money. By having a detailed credit history – showing evidence of prompt repayments on short term loans and credit cards – lenders will have visibility of your past record to pay back money owing. Bear in mind, however, that it is the quality of lender as well as quantity that lenders will want to see. If you have a record of payday loan companies you have borrowed from, lenders might view this as an inability to satisfactorily manage your finances. Managed properly, however, payday loans can boost rather than hinder your credit rating (see our page on how a payday loan can increase your credit score).
In addition to the above, there are other ways in which your credit rating can be improved, however these are our top tips. As it is your responsibility to prove to lenders that you are not a risky investment, we recommend that you consider making improvements to your credit score as soon as you are able, to avoid any problems when it comes to obtaining credit in the future.