Your credit score can have a massive impact on your financial life. From cheaper car finance to lower mortgage rates, your creditworthiness could affect your ability to get approved or the finance rate you may be offered. If you find yourself with a low credit score, you may be looking to improve it fast. However, building new credit habits takes time and you need to instil trust with future lenders. The below article highlights 5 easy ways in which you can get the best credit score possible.
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What is bad credit?
Bad credit refers to a low credit score. A low credit score can happen for a number of reasons and can affect your ability to borrow money from lenders. When you apply for any type of loan, credit or finance, a lender will usually run a credit check on you to access your credit file. Your credit file will give the lender they information they need to decide if they want to offer you finance or not. Bad credit practices such as missed payments, late repayment, high levels of credit and lack of credit history can all lead to a bad credit score. It can result in the lender rejecting your application or offering you a more expensive interest rate based on the level of risk.
How to avoid bad credit:
Bad credit can be like a shadow looming over your financial decisions, but do not let it intimidate you into inaction. By recognizing the factors that harm your credit score, such as late payments or high credit card balances, you can take proactive steps to mitigate them. Prioritize your debts and always pay at least the minimum due on time. Remember, your credit score is a reflection of your financial habits, and small, consistent changes can lead to significant improvements over time with patience and diligence.
Pay bills on time
When you apply for something like a bad credit car loan, the lender will run a credit check on you before deciding if they wish to offer you finance or not. A credit check can help them to see if you can be trusted to pay back future loans on time based on your previous experience. To help future lenders and raise your credit score, you should keep on top of any current payments you owe and make sure they’re paid in full. A missed or late payment can stay on your credit file for up to 6 years and can damage your credit.
Use credit little and oven
Many people assume that using credit is a bad thing but having a mix of credit can help to boost your credit score. You shouldn’t be relying on credit too heavily though and instead use credit little and often. This can be as easy as using a credit card to make small purchases on each month and paying them off in full by the due date.
Pay down debt
Your credit score will consider how much debt you currently have. Having high levels of debt can negatively impact your credit score. Before you try to apply for any finance or new credit, you should look at your current accounts and try to pay off any debt you owe first. Not only will it increase your credit score, but it can also help to improve your affordability.
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Dispute any mistakes on your credit file
When you apply for finance, lenders will cross reference the information on your application with the info supplied on your credit file. If the information doesn’t match, lenders may be worried it’s a fraudulent application in your name. Information which isn’t accurate on your credit file can also harm your credit score too. You can check your credit file for free and make sure all the information is up to date. If not, you can contact the credit agency who provided your credit file and ask them to update your details.
Keep old accounts open
If you have old accounts which you no longer need, it can be a good idea to keep them open. Credit scoring models can reward customers with a higher credit score for having long-standing credit accounts. This can include unused credit cards, bank accounts and store cards. If you no longer use them, it can be a good idea to keep them open as they can show proof of mix of credit and also a long history of managing debt.
In conclusion, improving your credit score doesn't have to be a complex or daunting task. By implementing simple yet effective strategies, such as timely payments, monitoring your credit report, and managing your credit utilization wisely, you can steadily boost your creditworthiness. Remember, small positive habits can lead to significant improvements over time, paving the way for better financial opportunities and a stronger financial future.
