It’s a feeling many of us are far too familiar with: You need credit to pay for something, big or small, and you find you can’t get the terms you want, or even that you can’t get credit at all! Lenders use many criteria when determining whether to extend credit, but one of the most important is your credit score. Credit scores are numbers created by the three credit scoring agencies (Equifax, Experian and Callcredit) that give a snapshot into your overall financial situation. If you aren’t happy with the terms you’re getting when you apply for credit, improving your credit score is one of the most important things you can do. Follow these five steps to get started.
Know Where You Stand
You can’t start fixing your credit score until you know what’s wrong. By ordering a copy of your credit report from one of the agencies, you’ll be able to review the factors that are hurting your score. Take note of things like county court judgements for debt, late payments and high levels of existing debt: These are the problems you’ll have to fix as you work to raise your score. While you’re doing that, be sure to hunt for errors in your report. There’s a possibility you’re being penalised for mistakes you didn’t make, or that you’re the victim of fraud or identity theft.
Register on the Electoral Roll
This one’s simple! Your credit report records whether you’re on the electoral register, and lenders are less likely to extend you credit it you aren’t. By registering to vote online or by post, you can improve your score and your chances of getting credit when you need it.
Pay Your Bills
One thing that can ding your credit is missing bills — the later they are, the bigger an impact they have on your score. Start scrupulously paying bills on time every month and your credit score should start going up. If you consistently have trouble finding the money you need to pay your regular obligations, it may help to put together a budget: When you see where all your money is going, you should be able to cut back on nonessential spending and save your cash for bills and other essentials.
Having too much debt can hurt your score, but it can also be overwhelming trying to bring it down, especially if its spread around among multiple creditors. One thing you can do is get a loan or credit card intended for debt consolidation. These usually have reasonable introductory rates, letting you pay off higher-interest debts and making it easier to pay down the debt that remains.
Give It Time
If you aren’t happy with your credit score, the biggest changes you’ll need to make will probably take a little time. In particular, negative marks like defaults and bankruptcies remain on your credit report for six years before they are deleted. Unfortunately, if your score is low because of major issues like those, you won’t be able to get a high score overnight. Still, if you follow the guidelines above, you should see your score go up over time.