Emergencies only strike when you least expect them. Imagine requiring urgent money to sort an abrupt situation only to learn that your credit ratings aren’t impressive at all!
How do you improve your credit ratings to avoid such a situation?
Here is a list of the 5 easy ways to improve your credit score in the UK
1. Get on the Electoral Roll
Survey shows that not even one among 18-24 year olds is aware that a loan request can be declined on the ground of failure to register on the UK’s electoral roll. Not only does electoral roll allow you to vote but it also has a bigger say on whether you are eligible for a loan or not.
With your name on the roll, you are more likely to be considered by lenders than a person who isn’t there. This is partly because the electoral roll proves your address and name to the lender.
2. Try to Pay Off Your Debts
When you approach a lender for a loan, they will almost certainly check with credit reference bureaus to determine whether you have debts on your name. Having loads of debts hanging on your head, including short term loans, means lenders will be more sceptical to give you their money – to them, it simply means you are less likely to repay the loan.
Paying off your debts boost your credit ratings in two ways: firstly, it sends a picture to your lenders that you are a reliable borrower who pays back on it (this holds if you actually settled your debts on time). Secondly, your name will be cleared of damaging reputation that is associated with debts.
3. Don’t miss credit card payments / pay them back on time
Delaying on paying back your credit card company is one of the worst things you can ever do as far as credit ratings are concerned. Many credit card companies won’t count three to list you as a defaulter within days of delay. Some of them would simply slap you with penalties rather than call a credit collection agency.
The penalty interest rate is normally high and further complicates an already worse situation. For instance, if you owed 500 pounds to your credit card company and delayed to repay it in a given time, causing it to accrue 150 in interests (at 30% interest rate), you will have a hard time repaying it back. As the debt accrues, it only means you will have to fork more from your pocket to back which also means you are more likely to end with a bad credit rating.
4. Check for errors on your report
Errors damage your credit ratings by sending a wrong picture of your credit standings to your lenders. Yet man is to error – these mishaps will keep occurring as long as credit rating databases are handled by people.
Sometimes you could be the cause of these errors, like submitting wrong details about yourself or forgetting to delink your former spouse’s liabilities from your report. You should check your report to establish the truthfulness of the details. On your part, you should exercise due diligence to ensure that every detail you submit is as it should be.
5. Don’t apply for too many credits at the same time
Most lenders would be hesitant to lend out a lot of money at once when they are not very optimistic with the security of the loan. So when faced with a major financial constraint, you may be tempted to seek small credits from multiple sources to add up to the amount you need.
Whichever reason you may give, multiple credits from many lenders will almost certainly be burdensome to pay back. Also, you could be tempted to overborrow (now that more sources are willing to lend).
The scariest thing about many credits from multiple sources is that you stand to add a blot on your credit ratings if you pay back most of your loans and defaulted in just one of them.
Bad credit ratings mean you will have a hard time convincing lenders to lend you some money. For this reason, you need to guard your ratings very closely. The best start would be to ensure that your name is on the electoral roll.
Pay off your debts and ensure that your report is error-free. Also, avoid defaulting on your credit card payments. Applying for credit from multiple lenders could prove burdensome to pay back and possibly give you bad credit ratings. Therefore, it is advisable to only borrow the required amount of money from one lender.