7 Ways To Overcome A Bad Credit Score

seven ways to overcome a bad credit score

Your credit score is your license to spend. A bad credit score can take away your ability to spend money on the things that you want. You could find yourself rejected when trying to buy or rent property, purchasing a car on finance and even when trying to take out a phone contract. Worse still, some employers are now running credit checks – which could mean losing out on a job offer.  Many things can lead to a poor credit score.  If you’re eager to improve your credit rating, here are 7 ways to overcome a bad credit score.

7 ways to overcome a bad credit score

Establish a credit history

Many young people get rejected the first time they have a credit check, not because their credit score is bad, but because they don’t have a credit score. To obtain a credit score, you need to establish a credit history. If you’ve never had to pay bills before, you won’t have a credit history and therefore won’t have a credit score. Some creditors will still take you on even if you don’t have a credit score (e.g. phone contractors, streaming services). However, the likes of loan companies and mortgage lenders are unlikely to trust you without some form of credit history to prove that you are a good spender.

Getting a credit card is one easy way to build a history. Your bank will usually offer you a credit card if you are relatively young with no score. Spend small amounts on it that you can quickly pay back and you’ll soon build a good credit score.

Start paying your bills on time

The biggest thing that can affect your credit score is your ability to pay bills on time. If you’re continually missing payments and going into arrears, likely, you’ll soon develop a poor credit score. 

Most creditors reject customers with a poor credit score because they don’t want to chase up late payments. You may have every intention of paying on time, but without proof of doing so in the past, they may lack lender confidence.

By getting into a good habit of paying your bills on time, your credit score will improve; which is easier said than done. This improvement could mean establishing a strict budget so that you’ve always got enough money set aside each month to pay off your bills. Budgeting apps such as Money Dashboard can be great for helping you to do this.

Borrow money wisely

7 ways to overcome a bad credit score
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Taking out loans with a bad credit score isn’t easy – many lenders will outright reject you. Fortunately, some lenders do lend to those with a bad credit score. However, you’ll usually end up paying higher interest rates and larger instalments in such cases, plus you need to be confident that you can pay this loan back on time so that you don’t cause further damage to your score.

If you’ve got bad credit, it’s best to only take out loans for emergencies. When doing so, try to look out for trusted lenders such as Buddy Loans that offer competitive rates. These services should be a last resort as it is always best to avoid borrowing altogether by setting aside savings for emergencies whenever possible.

Cancel unused credit cards

If you own numerous credit cards and some of them are unused, you could find that this damages your credit score. Whether you’ve never used them or whether they’re all maxed out, it could suggest that you don’t know how to use credit responsibly.

Cancel the credit cards that you no longer use, and you could find that your credit score improves. Sometimes it’s worth keeping on to the first credit card that you ever took out – there could be some critical credit history on this card if you used to use it a lot.

7 ways to overcome a bad credit score
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Get on the electoral register

A lot of credit checks work by matching up your electoral details with your financial information to ensure that no fraudulent behaviour is going on. If you’re not on the electoral register, there’s no way of checking this, and you could find that many credit checks are rejected simply on this basis.

Registering to vote is easy – you can do it online in a matter of minutes. Being on the electoral register doesn’t necessarily mean that you have to vote. For this reason, even if you’re disinterested in politics, it’s worth registering simply for the financial benefit. (But, you should vote!)

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Make sure your account details match up

The name and address listed on the electoral register must match the name and address found on your bank accounts and other bills. Bank accounts registered to a previous address or a maiden name, it could be misinterpreted as something dodgy going on, and your score could suffer as a result.

Always notify your bank, creditors, and electoral details when you move address or change your name. 

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Consider credit-builder schemes

There are several helpful programmes out there that aim to help you build credit. Credit builder loans are the most common and offered by banks. These involve taking out a small loan and paying it off each month. In exchange, your bank will put a good word into credit agencies, and your score will appear much better.

Such schemes can take several months to a year to take effect. Which might sound like a long time, but it’s one of the quickest ways to repair your credit score. 

Is getting your credit score in order a goal for 2020?  

**This is a collaborative post.

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