Your credit score is built up over years of paying bills, borrowing credit from lenders and saving.
It doesn’t matter if you’ve been a bad boy or girl, these tips will get your credit score out of the doghouse.
1 Don’t have too many credit applications
One of the worst things to do is go on an ‘application frenzy’ and shop your credit profile around to every finance provider. If you’re ‘rate shopping’, don’t sign up to apply for every credit card or loan that is advertised to you – lenders see this as irresponsible financial behaviour.
If you have a good or even an average credit score, overcommitting to borrowing is one of the easiest ways to sink your credit rating – and if you’ve already got a poor score, borrowing more probably isn’t the best way to address other financial problems you might be facing.
2 Don’t have too few credit applications
While applying for lots of finance isn’t a great idea, neither is never applying for any finance or getting other people to put their name on the account for things like your phone or electricity.
It might seem like you’re being cautious, but if you never prove that you can repay something – lenders don’t know that they can take the risk because you haven’t built up a strong history of responsible borrowing.
3 Don’t have too much credit outstanding (what a balancing act!)
If you need to borrow money for every expense, lenders start to see that you’re not so good with saving or planning your finances.
While a one-off big, unexpected bill may need you to take out a loan, if you start to borrow because you find your paycheck and savings don’t quite stretch to cover your expenses, your credit score could start to dip unless you sort out a financial plan that might have you cutting back on some luxuries.
The best motto when dealing with debt is to pay down your balances, and keep the balances low – whether that’s a credit card, loans or your bills.
4 Do stay in the same job
Stability in employment is a big plus for lenders when they’re reviewing your application for finance. 3 years is a good starting point – but don’t panic if you’re a contractor or have recently changed jobs: lenders are looking for a basic level of stability, so if you’ve regularly been employed on stable contracts, or have switched jobs to take advantage of a similar or higher salary – they won’t disapprove as much as borrowers who jump between jobs, or have large gaps in their employment history.
5 Do stay in the same house
This probably applies more if you’re a renter rather than an owner, but if you’re moving around a lot, lenders see this as part of a bigger sign that your financial situation may not be as stable as they’d like. Again, 3 years or longer is ideal – generally it coincides with how long you’ve been in stable employment.
Your living situation lets a lender know that you’re responsible enough to maintain expenses – electricity, internet, power – consistently.
6 Don’t get defaults
If you miss paying a bill, you could end up with a default on your credit history – which lingers for years, even if you pay it straight away.
If you are struggling to keep up with the weekly expenses, don’t try and figure it out on your own (or worse, ignore it!) – get in touch with the companies to see if you can extend due dates or even set up payment plans to settle your account. As long the companies know you’re making an effort to pay off your bill, they don’t mind how you pay it.
Defaults stay on your credit file for a minimum of five years, although they do record if they’re paid or on a current plan to be paid off. Avoid getting a default by speaking to the company if you know that your payments may be late, rather than waiting until it’s out of hand.
7 Don’t ignore disputed bills
Say your monthly bill rolls in, it’s sky high and you can’t recognise why – calling up the company to complain gets you nothing but hold music, the worst thing you could do is refuse to pay until your bill provider explains why your charges are so high.
Set up a payment plan if you can’t pay off the amount immediately, otherwise the company could call in a default or sting you for late payments.
Until you sort out why a bill is so high, it’s important to keep making regular payments and then, if you can prove that you were overcharged, you’ll get a refund or (more likely) a credit towards bills in the future.
The CarBeagle team work with lenders to sniff out finance deals that work for you, and try to find a loan that helps you to build up your finances – rather than just another debt.