There appears to be a common misconception regarding bad credit which results in many of us simply sitting and suffering with the belief that attempting to join the road to recovery is both costly and time-consuming. In reality fixing the financial wows of the past is fairly straightforward to the extent that you could realistically reap the benefits within a matter of months.
It’s estimated that as many as one in five UK citizens suffer from bad credit, some though misjudged and unrealistic financial commitments although for many it’s a result of the global financial crisis and resulting periods of unemployment.
Here, we list six tried and test tips for improving a bad credit score which combined can have a surprisingly positive effect.
1. Check your credit report
Unless you are graced with complete and unfettered access to your credit report any action you take is likely to be a complete waste of time. Initial access to your report is offered for free through services such as CreditExpert, although a monthly fee is usually payable following a trial period. Upon gaining access you will be able to see a breakdown of all your credit accounts, past and present along with a list of alerts for any accounts that are having a negative effect on your credit score.
This access will empower you to take action against any defaults, missed payments or debts that you don’t recognise or wish to dispute. If you come across anything untoward you should contact the relevant lender directly. As a last resort you can also write to the relevant credit reference agency with details of your dispute.
2. Join the electoral roll
For various reasons, mainly lack of time, many of us either fail to update our electoral status upon moving house or simply don’t bother with the electoral roll altogether.
Although it may not seem a big deal, joining the electoral roll at your current address can help improve you credit rating and also makes it far easier for finance companies to quickly and accurately verify your information.
3. Live within your limits
It’s important to always live within your means and if for whatever reason you can’t afford to make a repayment on time contact the lender straight away to make an alternative arrangement. Managing your finances in a responsible manner helps reduce the likelihood of you suffering a default in the future.
4. Avoid payday loans
This is particularly prevalent for those hoping to secure finance through their bank, as with applications for overdrafts, they may check recent transactions on your account for payments to or from payday loan providers. This type of short-term loan may suggest a financial shortfall and if used month in month out may result in your finance application being point blank refused.
5. Avoid making multiple credit applications
Although little know, not to be ignored is the reality that multiple finance applications can have a negative effect on your credit rating, often seen as a sign of desperation it may also indicate a brewing financial meltdown.
It’s important to space applications out and to only apply for credit you are likely to get. You can also ask lenders to assess your suitability for credit before they carry out a search against your credit file.
6. Pay off any outstanding debt
Show lenders you are financially responsible by paying off any outstanding debts before making a new application for credit. Outstanding debts, missed payments and late payments will all have a negative effect on your credit file, severally limiting your chances of gaining an approval.