Some people applying for a loan wonder why lenders reject their application. Only a few are aware that many lending companies check their credit history before granting them a short term or long term loan. But, what does bad credit mean?
In the UK, several agencies serve as credit reference bureaus, where anyone that needs to find out how a person behaves regarding his financial obligations. The credit score would reveal if lending to that person is risky or not.
Before applying for a loan, it is essential to check your credit rating first in any of the websites of the three credit reference bureaus in the country. These are the Equifax, Experia, and TransUnion. Once you see that you have a poor credit rating, you must find ways to fix your bad credit by ensuring that your score goes up. How can you do this?
Here are the five sure ways to fix your bad credit.
Take a Look at Your Credit Score
Many people do not bother to know their credit score only to find out that it is terrible when lenders reject their loan application. You can check your credit rating for free through the website of Experia, Equifax, and TransUnion. When you know that you have bad credit, you can do something to improve it. Check if all entries are correct, and if you find that a loan that you have paid long ago still appears as your current debt, ask the concerned agency to make changes. You would be amazed at how your score goes up after the correction.
Pay Your Bills Promptly
Your payment history has a significant impact on your credit score. Almost 35% of your credit score comes from the prompt payment of your bills. The credit reference bureau gets information from banks and other finance companies. Payback balances to prevent the issuers of those cards from reporting your activities. You can set up a bank account for automatic payments of your bills that are due to avoid forgetting owing dates.
Settle Your Debts
Do you have a debt that many years ago that you have not yet paid until now? Chances are it is still there in your credit record and lenders can see it. If you have a credit card, always pay in full at the end of the month. Carrying a significant balance on your credit card may not be right for your credit score. However, if you have no way of paying off all your credit card balances, make sure to pay those that have high interest first or pay little amounts to all your card issuers. Running away from your financial responsibilities could not help because it would always leave an undesirable mark.
Avoid Loan Inquiries
Avoid inquiring about loans in several lending companies. Every time you do, a lending company would conduct a credit check. With several inquiries on your creditworthiness, finance companies would think that you are in a difficult situation because you are trying to borrow money from several lenders. However, checking your credit score will not negatively affect your credit history.
Find Help in Building Your Credit
When you have issues with your credit, seek help from someone else. You can ask a relative or friend with an excellent credit record to authorize you to use his account. Every time he pays his credit card balance, you also get points as his authorized user, and your credit score goes up.
Make sure to get approval the next time you apply for a loan by improving your creditworthiness. Pay your bills on time, stop making loan inquiries, and settle old debts.