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Improve or rebuild your credit score fast

Improve or rebuild your credit score fast

Improve or rebuild your credit score fast

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Whether you are applying for credit cards or loans, short-term finance or a mortgage, your credit score could make the difference between you being accepted for credit or not. Improving or rebuilding your credit score can not only help to give you the best chance of being able to borrow, but could also cut the cost of your loan.

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What is a credit score?

A credit score, also known as a credit rating, is a number which represents your creditworthiness.

When calculating your credit score, loan providers look at your past behaviour and use this to predict how you are likely to behave in the future.

Contrary to popular belief, you do not just have one credit score. Your credit score is likely to vary from lender to lender, as they will all score you according to their own methods.

Why my credit file is so important?

If you apply to borrow money, the loan provider will use your credit file to help them to decide whether or not to approve your application.

Your credit file can also affect the interest rate you are offered.

If you never want to borrow money, you may not be too concerned about this. However, whether you are accepted for everything from mortgages to credit cards to monthly home insurance payments, can be affected by your credit file. So, for most people, it will be important to rebuild or improve their credit report.

What does bad credit rating mean for me?

If you have a poor credit history, you may find that you struggle to get finance at all. Alternatively, you may be offered a loan but at a higher interest rate. This is because you are seen as a higher risk compared to someone with a good credit rating.

There are loan providers who specialise in people with bad credit. Unfortunately, the interest rates are often much higher, meaning that borrowing could end up costing you more.

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How can I improve it?

It is not only those who have a poor credit history who may want to rebuild their credit score.

If you have never borrowed any money and do not have any credit cards, you may find it hard to be accepted for finance. This is because you do not have a credit history to help lenders predict your future behaviour. In this instance, you could find that you need to build up your credit score from scratch.

Thankfully, there are some very simply ways to improve your credit rating, whether you have no credit history or a poor credit history. Take a look at seven ways to rebuild your credit below.

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How long will it take to rebuild my credit score?

Rebuilding your credit score will take time, as you are trying to build up a picture of past (good) behaviour to make you more attractive to lenders.

You can normally see improvements on your file after around six months.

If you have a default on your file, it will stay there for six years. However, you can still start rebuilding your credit rating before this time is up, to show lenders that you are now a responsible borrower.

List 7+ ways to improve it

  • 1

    Make sure you are on the electoral role - if you are not, it is much more difficult to get accepted for a loan.

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    Always make any repayments on time - missed payments can affect your credit rating, whereas paying back what you owe when its due, shows you are a responsible borrower.

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    Credit rebuilding cards could help to improve credit scores - simply take out a credit card, spend a little bit on it every month and then pay it off.

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    Do not withdraw money on your credit card - it is expensive and it may indicate to lenders that you do not manage your finances very well.

  • 5

    Use an eligibility calculator to check how likely you are to be accepted, before applying for a loan - a lot of finance applications over a short period can affect your credit file.

  • 6

    Pay off any debt if you can- having too much debt can impact your credit rating.

  • 7

    Check any open accounts, such as credit cards or mobile phones, to make sure your address is correct, as this could affect your credit score.

Credit rebuilding credit cards: what is the gain?

Credit rebuilding cards are essentially credit cards for those with bad credit. They usually have very high interest rates, which is why it is vital that you pay them off in full each month.

By applying for a credit rebuild card, spending only a small amount (or what you would normally spend) each month and then paying it off, you are building up a credit history and showing lenders that you are able to repay what you owe.

Are there rebuilding loans?

By the same token, taking out a loan and making the repayments when they are due could, in some circumstances, help you to improve your credit score. Again, there are loans available for people with bad credit.

However, unlike credit cards, where you will usually be charged no interest if you pay your card off in full every month, it will cost you money to take out a loan, as you will be paying interest.

Ways to sustain good credit history

Once you have rebuilt your credit history, it is important to make sure you maintain it.

List 5+ ways

  • 1

    Make repayments of any debt on time

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    Do not make too many loan applications in a short space of time

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    Keep your account addresses up to date

  • 4

    Pay your utility bills on time

  • 5

    Keep an eye on your credit files to make sure there are no mistakes - if possible check Experian, Equifax and TransUnion

Summary

Managing and improving your credit score is essential if you ever want to borrow money. Even something as simple as taking out a mobile phone contract, can be difficult if you have a poor credit rating.

Your credit score can even affect the interest rate you are offered on a loan.

Thankfully, there are some free and easy ways to rebuild your credit score. Remember, lenders use your credit history to predict your future finance behaviour. So improving your credit file is about showing that you are a low risk to lend to because you are a responsible borrower.

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