POOR credit scores aren’t only a result of being a bad borrower. Of course, missing repayments and accumulating multiple debts isn’t going to look good on your credit report.
However, many lifestyle factors can have an adverse effect on your credit rating too.
If you’re a student without a regular income, you’ve recently returned to the UK after living abroad or you have a low income (possibly because you work part time) or are self-employed, you may be categorised with a poor credit rating.
What does this mean?
An individual’s credit rating is how financial lenders determine how they’re able to manage debt. The first thing a financial institution looks at when considering whether to lend money is the applicant’s credit rating — the higher the better. Without a good credit rating you’ll struggle to find a reliable lender willing to offer you a loan. When the time comes to buy a new car, house or pay off your student loan, a poor credit score can stand in your way.
How to improve your chances
While every lender has different requirements and there’s no way to guarantee your loan application will be accepted, there are things you can do to make yourself appear more attractive to lenders.
Financial lenders use your credit report to determine your credit score and everyone with credit has one. Credit reference agencies, like Experian and Equifax, safeguard these reports and give them to the lender who you have applied for credit with. Therefore, everything in your credit report needs to be accurate and up-to-date. A small mistake in your credit report could result in a bank refusing your application for a loan.
Get a copy of your credit report, read it, and correct any errors you find.
Surprisingly, being on the electoral roll can give you a better credit rating. Credit reference agencies and lenders use the electoral role to verify that you exist and ensure information they have on you is accurate. Checking your name against the electoral roll when you apply for a loan is also a way for banks to combat identity fraud. If you’re not on the electoral roll, lenders may also assume you’ve never had credit before which can work against you.
Having a credit card application approved can actually improve your credit rating. Specific credit cards work to build your credit rating by giving you manageable limits, repayments and rates. With a competitive rate of just 32.9% APR, the aqua Classic credit card incorporates SMS reminders (so you never miss a payment), online account management and a 24-hour customer helpline to ensure you manage your debt and, in turn, improve your credit rating.
Pay on time
Lenders are mainly concerned about whether you’ll be able to make repayments on time. They’re not worried about your family problems or your work commitments, only about if you can be trusted with their money. To show them this you have to prove you can manage your finances and bills. Set reminders for yourself or direct debits from your account to ensure you’re making any current repayments monthly and on time. If you fall behind, don’t panic. Many companies, like aquacard, offer customers a helpline and assistance to get them back on track.