Credit ratings are very crucial for everyone as it determines your credit worthiness, these days the number of people who are dependent on credit is considerably increasing. Thus lenders consider personal credit ratings and credit reports to estimate your potential to repay the debt. Credit ratings are evaluated by credit bureaus who analyse your past history or transactions. You need to manage credit ratings, especially while planning to take a loan, as a low credit rating indicates that you’re borrowing high risk borrower and are unlikely to pay the loan back. The following ways will help in improving your credit ratings:
Know the basis of credit rating
Any defaulted payments or filing for bankruptcy can leave a negative mark in your credit report and may affect you while trying to secure loan. Having a bad credit rating means it can narrow your borrowing options. You can find black marks against your name in your credit report if you have missed any utility payment like energy bills, credit card payments or any other commitments. In the current market the only means of credit options available for the people with poor or bad credit rating could be subprime market, where this type of credit comes with higher interest rates.
Check your rating
Most banks and lenders go through the report given by major credit agencies to know your past financial information; these agencies compile your credit history from different sources, this can include court judgements and electoral also. Remember every time you open a new credit, your credit report will include that data.
Correct any mistakes that arises on your credit file
Under the Data Protection Act, you have right to correct any inaccurate information on your credit record. If your loan application is refused by your lender then you can demand your creditor to review, this provides you an extra chance in identifying mistakes. If the information recorded is inaccurate you will have to contact the credit agency and get the problem sorted out.
Improve your credit rating
If you have poor credit ratings take necessary steps to improve it, here are a few tips that help in improving your credit rate:
- Make your payments on time
- If you have missed any payment, contact your creditor to explain your financial situation and ask can you pay it the following month.
- Make sure you are on electoral roll, which is one of the essentials in boosting your rating
You can attach a report to your credit reference agencies explaining the reason why you have missed the payment.
Check information registered is correct for example it can be your name and address
Don’t apply for credit in a rush where there are more chances of rejection
Apply only after knowing the interest rate and the credit that you are probable to get
Build a credit history
The best way to boost your credit rating is take a credit card, use a small amount and try to clear the balances on regular basis and prove your credit responsibility. If you are short on money to pay the balance in order to improve your credit rating, you can try considering payday loans which don’t require a credit check or collateral submission.
About the Author:
My name is Michelle. I am a tech writer from UK. I am into Finance :). Catch me @financeport