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How Can You Improve Your Credit Score?

Posted on 28th July 2022
How Can You Improve Your Credit Score?

When you look to secure finance, whether it’s for a car, a holiday or maybe through a simple credit card application, you will often hear that your rating is not sufficient. Lenders have an obligation to both you and themselves, and if letting you borrow a sum of cash puts either at risk, the likelihood of the application being accepted is low.

Of course, lenders want to make money and letting someone borrow an amount for a prolonged period can return a healthy profit. However lenders must also weigh up whether the person will be able to pay back the money being lent.

Working in the trade of finance, we know all too well how circumstances change for people. Rising bills, stagnant wages and possible job losses all mean that credit options can be limited. This is why over the years, we have cultivated the best in poor credit car finance.

So, how can you raise your credit score from 200 to 700? What steps can you put into place to make sure that the applications you previously worried about are no longer a concern?

Read on to find out.

What is a credit score?

Many of us will have used a credit score checker online; we want to see how strong our rating is. This number you see generated can look good in many cases. However, this is only the number generated by this agency, not what the lender itself thinks. Lenders will use their own formulas and checks to see if you are suitable. Whilst the data they will use is the information from the credit score agency, they will ultimately make a decision based on their own processing of the required information. One important thing to remember is that nobody has one set credit rating. Where one organisation sees you as a risk, the other may see you as an opportunity. If you have found yourself constantly declined, then maybe there are a few things you can do.

Why is a credit score important?

A credit score can help prove to lenders that your track history in making payments when borrowing money is good. If you are seen to make applications, secure finance and then never pay it back, or stall on making payments, your score may show as quite low. This can vary per organisation, and as mentioned above, there is no set credit score per person.

However, if you have completed a credit score check through multiple organisations and they all come back low, this means many lenders see you as someone with poor credit. Lenders will weigh up the possibility of you paying back your loan. If they see a better rating or score, they are more likely to consider your application and accept it at a better level of interest.

The key steps to improving your credit score

There are a selection of things you can do. These are all relatively simple, and if implemented, a previous ‘no’ from a lender could turn into a ‘yes’.

Prove your identity and status

When filling out any application, the slightest error can determine whether finance is granted. Make sure you are on the electoral roll and that this data reflects your current address. Next, ensure all information relating to employment is correct. Where your salary is requested, make sure it is correct. A missing zero, for example, could easily ruin the application. Furthermore, constant changing of phone numbers, email addresses or job titles could raise eyebrows over the authenticity of your application.

Build your credit history

If you have never had an overdraft, a loan or a credit card, there is not much for finance companies to go on with regards to your payment history. However, credit cards exist for people like this. A credit builder card will have a low spend limit, and unfortunately a high interest rate. However, if used to purchase small amounts and it is paid back in full each month, you avoid the high interest and build up your score. However, this should only be considered if you can commit to paying the balance in full each month.

Make payments on time

If you can show a lender that any borrowed funds in the past have always been paid on time, you will be a much more attractive prospect than someone who is less punctual with their repayments. Keep on top of payments by setting up a direct debit. Just be aware that direct debits are set to take the minimum payment value – this means you could be paying for longer, which could end up costing you more. Where possible, commit to the direct debit and then top up the payment each month manually.

Watch your credit utilisation

If you do have a credit card, you can build your better credit score through good management of your card and payments. If you were to have a credit card with a limit of £4,000 but have £2,000 available on it, you have utilised 50% of the card. The lower the utilisation, the more favourable you could be to lenders. However, a 0% utilisation of your card won’t benefit your score, as there is nothing to pay back. The leading credit score agency Experian recommends that you keep the utilisation to around 30%.

Don’t apply for credit too often

You may be thinking that once you have been turned down, you are best off applying again. However, this is not always the case. Each type of application you make puts a footprint on your credit file for one year. If you make several credit applications in a short space of time, you could appear desperate for cash. This will result in rejection. Put your borrowing into priority order. If you need a car but are considering a credit card too, an application for finance for both at the same time could result in two rejections. One now and another in a few months, however, could result in two approvals.

Only use debit cards for cash withdrawals

If you have a credit card and withdraw cash, not only will you have the additional interest added, but it could also appear to lenders that you cannot manage your money well.

Pay your rent on time

If you live in social housing or rent privately, you may be able to increase your credit score via a free scheme. You will need to sign up for at least 6 weeks for rent to show on the credit file, but if you pay on time and use these schemes, you can see a dramatic increase in your credit score. In line with this, be mindful that a missed payment could have a hugely negative impact on your score. Speak to your landlord or housing association to find out if rent can be paid this way.

Stay away from payday lenders

Many forms of credit are rejected when the lender sees a payday loan on the file. Not only will they cost you vast sums of money, but they are also seen to show extremely poor money management. Research over the past few years has shown that a fifth of mortgage applications for first-time buyers were rejected because of payday loans.

If you have seen a poor credit score on any credit checker, speak to us. Our speciality is in helping people secure fast car finance where they otherwise thought it would not possible. Poor credit car finance is an area we have established ourselves in as market leaders.

Whether you are in the market for a new car or are considering used car finance deals, contact us today. With over 50,000 vehicles available, it has never been easier to get on the road.

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