There are several reasons why your credit rating might not be as good as you’d like it to be. It’s difficult to build up a great credit rating, but really easy to ruin it.
One mistake, like missing a payment on a loan or credit card or even applying for too much credit that you’re not eligible for can leave your credit rating lower than you’d ever hoped it would be, and it can stay like that for some time.
But rest assured that even if you have a poor credit rating, getting the credit you need isn’t completely impossible. While you might not yet be able to get a large loan from the bank or a brand new car on finance, there are some things that you can do to improve your credit rating, figure out what you can borrow, and work out what needs to be done to make sure that you don’t find yourself in this situation again. We’ve put together some top tips to help you borrow money with a poor credit score and improve your rating to make future borrowing endeavours easier.
Pay Off Any Money You Owe
First of all, you need to make sure that you don’t currently owe any money that could be harming your credit score. While having some credit that you are able to easily manage can improve your credit score, borrowing too much can mean that you run into problems. Brokers look at your credit score before deciding whether or not to approve your application and if you already have a lot of debt, they are more likely to decline you. So, the first thing to do is look into managing any debt that you already have. If you are struggling to repay, avoid borrowing any further money as this will only worsen your situation. There are several methods that you can use to repay current debt, including debt management plans and the debt snowball method. If you need to make reduced payments, contact your creditors as soon as possible and come to an agreement with them.
Bad Credit Loans
If you’ve paid off any debts that you had but your credit rating is still not looking great, don’t worry. It can take some time for your credit rating to improve after repaying your debts, as any missed payments or defaults will stay on your file for up to six years. However, since you are no longer in any debt, some brokers may be more lenient when it comes to approving you for a loan or other form of credit. Loans for people with bad credit can be a very useful tool here, as they tend to take your individual circumstances into account more than your credit rating, giving you a better chance of approval. Poor credit loans tend to be short-term and, therefore, easier to manage if you are responsible. And, taking out loans for bad credit and paying them off in full and on time will leave a positive mark on your credit score. Check out these loans for people with bad credit from New Horizons, a broker with a variety of options for all circumstances and needs. You can get a quote in minutes and if accepted, money is paid into your account very quickly.
Understanding Your Credit Rating
It’s hugely important that you are aware of and understand your credit rating when trying to improve it. You can use a variety of both free and paid credit score services to check out your credit score and see what brokers see when you apply to them for finance. Checking your credit score regularly will help you get a better understanding of where you stand and what you need to do in order to improve it. Some credit checking services also offer helpful advice and tips to follow to help you boost your credit score. You should also check your credit score for any errors that might be bringing your rating down needlessly. For example, an error in reporting when you made a payment could mean that you are listed as missing or being late on a payment when you were not, which can negatively impact your score. You can apply to have any errors that you find removed from your credit score.
Your Regular Expenses
Bear in mind that it’s not just loans and credit cards that have an impact on your credit score. Your regular expenses, such as utility bills, can also have an impact. This is often true for bills for utilities such as your smartphone contract or broadband, which tend to work similarly to a loan. Your water bill might also show up on your credit score. Because of this, it’s important to ensure that these bills are paid on time. Being late with payment might not seem like a big deal at the time, but it can cause damage to your credit score that can be difficult to repair. If you are struggling to pay your priority bills, the best step to take is to contact the companies and let them know your situation so that you can come to an agreement that works well for everybody. Most will be happy to accommodate reduced payments if needed.
Check Your Eligibility Before Applying
If you’ve paid off all your debt and are hoping to borrow a small amount of money in order to start rebuilding your credit rating, it’s important to be realistic with what you apply for. Chances are, if it’s taken you a while to pay off your debt and your credit rating suffered as a result, you are not going to be approved for a £10k loan from the bank even if you’re debt-free right now. And, applying for too many loans and other lines of credit that you are declined can harm your credit rating in the short-term. In fact, rejection can stay on your credit file for 2-3 weeks and impact any applications you make during that time, so if you are rejected for credit, don’t apply for anything else for at least a few weeks to avoid this happening. The best way to make sure that you don’t get turned down for credit is to use an eligibility checker tool beforehand. These tools will not impact your credit score at all and will let you know how much of a chance you have of being accepted for a certain loan, credit card, or another form of finance. You can then use this information to make an informed decision regarding what to apply for.
You’ve repaid your debt, taken out and repaid a bad credit loan, and your credit rating is improving a little – what next? The best way to boost your credit score is to borrow some money and show that you are able to pay it back responsibly. But at this point, you might not be eligible to borrow a huge amount of money. So, start small – catalogue accounts, credit building credit cards, and SIM only phone contracts are small credit lines that you have a bigger chance of being accepted for and will be easier to manage in order to improve your credit score. Only apply for credit that you are certain you will be able to repay.
Borrowing money and repaying it responsibly is essential for building your credit score, but your bad credit score might be holding you back. Keep these tips in mind to improve your chance of being accepted for credit that you can use to repair your credit rating.