Your credit status is more or less the same as your health. Unless you keep on monitoring and evaluating how you are doing, you may find yourself in the red zone. In the UK, Experian, one of the major credit reference agencies (CRAs) has mapped out using data the average credit scores for 391 areas. When you key in your age and then select your region, you’ll get to know what the average score is for that specific area.
Depending on the CRA you use to assess your scores, you will find yourself in any one of the following 5 categories- Excellent, Good, Fair, Poor, Very Poor. If you lie in the ‘Poor’ or ‘Very Poor’ categories, you need as a matter of urgency, to repair your credit. If you fall in the ‘Fair’ group, your score is average meaning you have some work to do to push yourself up the pyramid.
As long as your score is less than 999 on Experian, 710 on TransUnion and 700 on Equifax, there is something you need to do. With a good credit score, you stand a high chance of getting approved for almost every credit you apply for, and you’ll also get competitive rates. In this article, you will learn 5 steps you can implement right away to repair and boost your credit score.
Check Your Credit Score
It is not practical for you to begin repairing your credit unless you first know where you stand. Running credit checks with Experian, TransUnion, and Equifax will give you an accurate view of where to start.
Apart from getting to know your score, use the credit report to check the accuracy of the information entered by the CRA. For instance, there could be accounts fraudulently opened under your name or inaccurate personal information.
You can dispute any erroneous information in your credit report by filing for a Notice of Correction with the concerned CRA highlighting the specific information you are contesting.
Pay Up your Bills on Time
Late or missed payments can put na massive dent in your credit score. On the Experian scoring model, payment history has a weighting of 35%. This means more than a third of your score depends on how well you keep up with your bills including credit card payments.
If you have a problem keeping up with your bills schedule, try automating your payments so that bills are cleared as they fall due without your intervention. In case all your bills fall on the same date, consider rescheduling them so that you can get a reprieve in between.
Be upfront with your creditors. If there is an option for alternative payment plans that can lower the monthly amounts payable, explore them. For instance, if you are experiencing financial hardship, credit card companies can reduce your instalments until you get up on your feet.
Repay your Debt
After payment history, the second-largest component in terms of impact on your score is your credit utilisation rate. The amount you owe in credit card debt divided by the credit limit you have available gives you your credit utilisation ratio.
While it is understandably difficult paying up your debt, you are much better off paying it piece by piece until you get it paid in full. For instance, instead of making only the minimum payments on your credit card facility, consider whittling the card balances down to zero.
You can also consolidate your loans to help you manage them better. Get a loan that can help you pay off all other debts so that you can only remain with a single obligation to service. You can take a competitively priced non guarantor loan to help you clear your credit card balance.
The beauty with strategy is that these loans do not appear on your credit report hence won’t affecting your score. On the other hand, when you pay up your credit card debt, you will receive a boost in your score.
Avoid Making Multiple Loan Applications Successively
When repairing your credit, the last thing you would want is multiple hard enquiries on your credit file within a short span. This means lenders are checking your credit status to help them evaluate if you are fit for their products.
As one hard enquiry after another hits your credit report, lenders will increasingly see you as a credit risk trying to save your skin by borrowing from multiple sources. The impact this has on your credit score can be huge.
As an alternative to borrowing from different sources, try shopping for one credit facility say an auto loan and then consider offers from different lenders. The scoring model treats this differently from opening a lot of credit cards in one go.
Consider Getting Help Repairing Your Credit
Other than working yourself lame trying to rebuild your credit all by yourself, you may want to try other strategies to quickly move you up the scoring ladder. Here are some of the ways you may want to look at.
You can become an authorised user in an account that is always paid up and in good financial shape. Ensure the primary user has an excellent record that you can piggyback on to rebuild your credit score.
When applying for credit, consider getting a cosigner with good credit standing. The joint consideration by the lender may increase your chances of getting approved and boosting your score.
The third strategy you can use is that of opening a secured account. In this account, the lender requires that you put in an amount of money against which they advance credit. You can not be issued with credit card debt that exceeds the amount you have in the account. This ensures you are always secured, making you a responsible borrower.
While a bad credit score isn’t something to be proud of, it shouldn’t weigh you down either. With a solid stepwise credit repair plan, you can improve your credit score and take it as high as you want to. Starting by knowing where you are at and facing the situation as it is, will firm your steps and point you in the right direction.