There are two main reasons why people have a low credit score; Firstly they haven’t had the time or opportunity in their financial dealings to build a credit profile, this is a bit like Catch 22, how can you obtain a mortgage, credit card or a loan to build a positive credit score if you need a positive credit score to get the mortgage or loan in the first place! Secondly, where people have found themselves in financial difficulties and perhaps failed to make repayments on time or had legal judgments made against them for non-payment or late payment of installments, the credit agencies are made aware of this and adjust the person’s credit rating accordingly.
Mortgage and loan companies access the credit agency register and use the credit score to determine if they think that the proposed borrower is a ‘good bet’. Of course a low credit score means that you either don’t get the loan you want or, if you do, you pay a premium rate of interest in return. In today’s economic climate the situation is exacerbated because of the increased reluctance of lenders to part with their money to even the most creditworthy individuals. And this doesn’t just stop at individuals, the financial institutions are even reluctant to lend amongst themselves, as evidenced by the interbank lending rates being significantly higher than the bank base rates. In the light of this, the ability to receive the most appropriate consumer credit help becomes even more important.
There are three routes you can choose from to help resolve this problem: using Attorneys, using Credit Repair Clinics or doing it for yourself. Using either of the first two can be expensive and arguably it’s not in their interest to be as time conscious as you would be, but to a degree they do know the techniques needed to get a solution of sorts. However, the problem in doing this for yourself is knowing where to access good information, quickly, that can be trusted to work. There are a number of good practices that you can initiate immediately which will either improve, or equally as important, not further damage your credit rating.
These include the following:
- Ensure your credit record is correct: Get hold of your credit report and ensure it’s accurate. An error on your report can lead to you being declined unnecessarily. If you do find something wrong your lender will tell you which credit reference agency has been used so you can contact them to ask for the record to be corrected.
- Timing Applications Correctly: Be aware that details of loan applications are left on your credit records and so don’t make lots of applications in a short space of time – space these out and note that things like mobile phones and car insurance applications can count also. Ask for a ‘quotation search’ rather than a ‘credit search’ so it wont be recorded, but note, not all lenders will comply so if it’s unlikely you’ll actually go for the product, don’t bother applying.
- You score better when you’re earning: If you suspect you may be separated from your job, apply beforehand.
- To obtain a credit score: If you can’t get credit you can start gaining a positive credit score by obtaining very high interest credit cards. Use these over the next 6-12 months, spending a little each month and repaying them each month so that there’s no interest cost. After this you’ll have built a credit history which will allow you to apply for more competitively priced products.
- Keep up payments: This is an obvious one but at least look to make the minimum payments on your financial products otherwise it will adversely impact your ratings, potentially for years to come.
- Don’t bury your head in the sand: If you are in trouble, contact your lender to discuss options – they’d rather help you than have you default.
- Cancel unused credit cards: Ironically access to too much credit, even if unused, can be a problem so cancel any unused cards.
Be honest: Whatever you do, don’t be dishonest in completing application forms, for a start it’s an offence and in any case information that can’t be corroborated is likely to be discounted for credit scoring purposes anyway.