A credit score is a parameter that determines your creditworthiness as a borrower. A three-digit number represents this score which usually starting from 300 to 850. The likelihood of getting better rates improves with higher scores.
The lenders look at these scores to understand whether you will repay loans. The approval decision depends largely on the perception of the lender about your scores.
The three dominant credit bureaus, i.e. Experian, Equifax and TransUnion, process and represent information concerning credit scores in the market. An easy tabular representation of the different types of scores for your better understanding is available below:
800 to 850
740 to 799
670 to 739
580 to 669
300 to 579
Now, if your score is 452, is it good or bad? You can find out from the above table. Clearly, your scores are poor. As you know, credit scores can influence interest rates. Therefore, having a good credit score is a great deal when it comes to getting reasonable rates with credit cards and loans.
Consider referring to the 10 tips which can help you to upgrade your credit scores. Give this blog a good read, as your credit history can impact your borrowing potential.
Useful ways to improve credit scores
The first thing you must do is to collect your free credit report without further ado. A whole lot of information will unveil before your eyes. Therefore, getting it becomes the primary task before you attempt the transition from a bad credit score to a good.
Get into the credit improvement journey by taking the help of the following tips.
1. Voter registration
Are you on the electoral register? If you are unsure about it, check immediately and do the needful for your voter registration. After it, you will get to see your current address updated on the electoral roll.
You can show this as address proof to the lenders, who will need these details to validate your identity. Sometimes, rejection happens when the lender fails to confirm this basic factor.
2. Establish your creditworthiness
It is alright if you do not want to borrow money just to build your credit history. However, loan providers will question your credibility, as they cannot make sure about repaying capability.
Here is a tip for you! Take out a small amount which you can easily pay back. This step is crucial to strengthen your borrowing chances in future by building your creditworthiness.
3. Be punctual in paying off bills
If your past record shows defaults and late payments, it will be a red flag for the lender. They will hesitate to believe that you will repay on time. For this reason, to rule out the negative impact of missed payments, clear all the bills as early as possible.
You can be in a better position if you have previous accounts with a history of on-time payments. For example, it could also be an old and unused credit card account.
4. Be mindful of your credit utilisation percentage
Credit utilisation is the percentage of the amount of credit you have utilised out of the limit available for you. Suppose the credit limit accessible for you is £ 3000, and you have used £ 1500. In terms of percentage, it will result as 50%, which ideally should be below 30%.
A low percentage leaves a positive impression on the lender’s mind. As a result, it will attract good credit scores.
5. Check if you have a joint account with someone
At times, you might forget about having a joint account with another person. However, your credit scores can suffer because of this, as the activities on the account will affect your credit history.
If your partner has a poor score, your credit history will replicate it. Therefore, you must ask the other holder to practice the necessary steps to upgrade scores. Otherwise, your scores will not improve.
6. Look for mistakes or errors in the credit report
A small error can ruin your credit scores. It could be incorrect address information also that can convince the lender to reject your application. Instead of just assuming, review your credit record carefully to spot errors (if any).
You can raise a concern only when you are aware of the mistake present in your credit report. Otherwise, it will remain idle in these records and keep harming your credit status.
7. Report fraudulent activity without any delay
Make it a habit to check your report from time to time. When you do not do that regularly, the scammers get an opportunity to steal information. They will misuse your information if you do not pay attention to it.
Report any activity like an unknown credit application, or else your credit scores will not upgrade.
8. Do not shift your address too often
Maybe, you are living in a rented place. It does not mean you should keep changing your address after every month. If you do so, it will directly question your reliability.
The lender will consider lending you money as a potential threat. They might assume that you do not have the capability to meet rent and thus you change home too often.
9. Do not disturb your old accounts
If your older credit accounts have a history of timely payments, it would be better to keep them as it is. This way, you have managed more than one account responsibly. A longer history of handling multiple accounts while utilising a small part of the credit will get more weightage when it comes to improving credit scores.
10. Avoid sending out multiple applications
You might face rejection from a bank or lending institution because of bad credit. Do not try to forward another application! It is because you might have to face the same fate.
Moreover, multiple application attempts in a short span will have a distressing effect on your credit profile. Refrain from doing this while you must try out approaching LoansForever to seek financial help despite bad credit scores.
Additional tips to keep your credit scores immune
Only improving will not help unless you take care of the additional aspects that can further ruin your scores. These are:
Sensible handling of defaulted accounts: Do not keep such accounts idle, as it will portray your failure as a borrower. It may damage your credit scores.
Be alert when you borrow: The lender will offer a range from where you must borrow. Understand how much you can afford and borrow accordingly without exceeding the limit.
The bottom line
The risk factor has a close connection with your credit scores. When scores are good, you are a perfect borrower for the lender and vice versa. The lender will be willing to offer reasonable rates on being convinced of your stellar credit scores.
High scores have a positive effect because they display how you have managed your credit sensibly. You can establish it by paying off the rent on time or the mobile bills within the due date. Getting loans and mortgages becomes smooth when you have good or excellent scores.
Save these mentioned tips in your mind and do the needful to improve your scores.