We all know how important our credit score is when it comes to borrowing money to finance our lifestyle. Mortgages, car finance and home appliances are just some examples of purchases that usually require credit, and therefore a credit score. If your past relationship with money is a little strained, you may be worrying about irreparable damage that might have been caused by previous late payments & high debt levels. The good news is that as long as you’re back on track now, there are small actions you can take to help speed up the rebuilding of your credit score and improve your chances of acceptance, along with the rate of interest you’ll pay.
It’s best to know where you’re starting, so if you’ve never checked your credit score before, you can do so using Clearscore.
With a current poor rating you may be unlikely to be accepted for any low interest loans, such as those from your bank and, while steady loan repayments could improve your score, they will also increase your long term debt. To improve your score more quickly (and often interest free) a credit card is a great option for making a start.
Some things to consider first
Before applying to any credit card provider, you should weigh up a few things, such as:
1) Credit searches will appear on your credit report and reduce your score. To reduce the risk of an unnecessary print on your credit file, see if you can get pre-approved. Money Saving Expert can help with this – simply enter some basic details, and a list of potential providers will appear along with a percentage of the likelihood of acceptance. This isn’t guaranteed, but will give you a good idea of where not to apply. “Apply for too many cards and receive multiple rejections in a short period and you could shoot your credit rating in the foot for years. This is the dreaded rejection spiral!”
2) Look out for 0% interest cards. If your credit score is low, you may not be eligible for 0% credit cards however this should be your first choice if possible.
3) Beware the risk of temptation. Don’t get dragged into even more debt – apply for a small, manageable limit.
Once you’ve considered all factors, applied, been approved and received your contract & details, you can make a purchase. For the purposes of improving your credit score, make sure the purchase is something you would usually pay for using cash or debit card and then, before any interest is applied you can pay it off. By paying on or before the due date, you’ll avoid any interest charges while building what’s known as revolving credit.
Avoid paying the minimum payment, as this will take a while to pay off and accrue interest.
For more information, please visit Clear Score where there is helpful information available. “ClearScore exists to make your finances simple.”