Credit is everything in this age. It dictates if you can qualify for a loan, mobile phone contract, a mortgage and a credit card – just to name a few. Credit has become the ultimate currency of the 21st century, and with no credit, it’s near impossible to get yourself any of the things listed above. But, where there’s a will, there’s a way!
Even though your credit is less than desirable, there are ways to improve it drastically. It’s important to get to the root of why you have bad credit in the first place. Bad credit can be the result of a numerous reasons. Never building a credit profile can result in poor credit, meaning if you’ve never paid a bill, taken out a loan or a credit card, your credit score may be non-existent. Similarly, missing repayments on bills, loans or credit cards can seriously affect your credit in the long run.
Unfortunately, there’s no quick fix for a bad credit score – however, there is a way to improve it for the future. Here’s a step by step guide, on how to improve your credit.
- Consider a loan
Now, after reading the introduction you may be thinking, ‘hang on, how am I supposed to get a loan with bad credit?’ Well, the answer is that there are types of loans that don’t rely on your credit history, but it’s imperative you know what type to look for. Firstly, make sure it’s an unsecure loan, a secure loan will see your property/possessions put up as collateral against the loan, which is dangerous and not ideal. Whilst payday loan companies may try and entice you with ‘fast payments’ and ‘quick cash’, don’t be fooled. Payday loan companies have staggeringly high representative APRs on their personal loan repayments, over short term – making them extremely costly.
Guarantor loans are much safer and a more sensible way to borrow money, for those with bad credit. A guarantor loan does not rely on your credit history. You only need to provide a guarantor who trusts you and agrees that should you be unable to meet any monthly payments on the loan, they will cover it. A loan isn’t always an answer for those looking to rebuild their credit score, but it is an ideal way to manage payments and strategically plan out your spend.
Loan amounts vary from company to company, so always look around before taking out a loan. Borrowing the minimum amount from a loan company can be the first step to improving your credit score in the future. Be wary of payday loans as they have higher APRs then other bad credit loans, a guarantor loan is one of the fairest deal you could get with bad credit. Even if you save your money, repaying the loan will begin rebuilding your credit score.
*** Before taking out a loan it is always important to seek independent financial advice and perform a credit check. Always compare loans before deciding to find the best deal. Taking out a loan you cannot afford to repay can cause you serious money problems. ***
- Get a phone contract and start paying bills
One way to enhance your credit score is to get your name on some bills like home phone, broadband or even utilities. Even if you don’t pay them yourself in full, if you’re in a house share or living at home, get your name on the account so you can pay off a fraction of them and build a profile for yourself. Once your credit score is decent, you can qualify for a phone contract.
Most phone companies will need you to have an existing credit score, before they approve you for a phone contract. Paying off your monthly bills or phone can start to improve your credit score gradually. The repayment of any type of bill is beneficial to your credit score. Missing bills can affect your credit score badly. A personal loan could be used to pay off any bills that come your way, and repay the loan instead of repaying multiple debts/bills.
Another way to improve your credit is to consolidate any other debt that is outstanding. If you use a loan for debt consolidation, you can manage all of your debt into one repayment, that is easy to keep track of. Debt management is one of the most stressful things, but consolidating all your debt into one payment can help you get out of the red and into the black. Bad credit originates from having outstanding payments and debt, but by paying off that debt, you can begin to improve your credit score.
- Let’s talk credit cards
When you finally qualify for a credit card, make sure you use it as little and as often as possible. Only use your card for things you can afford. Whether that be for petrol, travel or a necessity each month that factors into your monthly outgoings – never use if for flashy expenditure! By paying off your credit card almost instantly, you can avoid any charges you may incur. Paying your mobile phone bill or any other bills, that are fixed, from your credit card is a good way to manage and keep track of how much you’re paying.
- Register to Vote
Believe it or not, registering on the electoral role can improve your chances of being approved for credit and the way lenders view your application. Lenders and other credit agencies can use the fact that you’re registered to verify who you are, casting you in a more favourable light for lending and applying for credit.
Building/rebuilding your credit score is easier than you think. It just takes some time and some financial management to make sure your credit is the best it can be. A personal loan can give you a financial leg up on rebuilding your credit score, even borrowing the smallest loan amounts offered, whilst paying bills can gradually begin improving it. Managing debts into one payment makes it easier for you to manage your finances and improve your credit. Making small purchases on your credit card can help too, as long as they are paid off ASAP. Finally, registering to vote can help you be approved by credit lenders. Follow these tips and you could be on your way to a better credit score.