Practical tips to help you improve your credit rating and avoid expensive high interest loans
Did you know that your credit score can ultimately impact your ability to borrow money using different means such as; credit cards, loans, and mortgages? We guess that you probably already knew that, however, there are also many other ways in which your score can impact your life.
If you have a number of black marks on your personal finance history, it is important to take steps as quickly as possible to demonstrate that you are getting things back in order. Without doing this, the damage caused by a poor score can be wide-reaching.
In this article, we will be discussing 5 different ways a poor credit rating can negatively impact your life.
One of the primary ways in which a bad credit score can impact your life is the ability to obtain finance. The truth is that no one (banks, credit card companies, etc) is likely to be willing to give you any kind of financing if you have proven that you cannot pay your bills on time.
That means you will likely be turned away if you need a loan to start a business, want to get a mortgage for a home, or you simply want to open a new credit card.
The following Money Saving Advice article offers insight and information relating to how a declining score can impact your ability to borrow money:
Whilst most people are already aware of the impact a poor credit score can have when you try to borrow money, did you know that it could stop you renting accommodation?
This is because landlords typically look for low maintenance tenants that they can trust/count on to pay on time. Prospective landlords will always look to the financial background of any prospective tenant and in a lot of cases, they will even go as far as to refuse potential renters that have bad credit because they are higher risk than those with good credit. If you have proved that you simply do not pay your bills on time, you are going to be less likely to get approved.
Another great article by the excellent LaToya Irby over at The Balance takes a closer look at how there are ‘6 ways you can rent even with a bad credit score‘. We highly recommend taking a few moments to give it a read.
Are you thinking of taking out a new phone contract or signing up with Sky/Virgin Media? If your credit standing is not up to the required level, there is every chance that your application may be rejected.
Many current service providers have a minimum required score in which they enforce on new sign-ups and customers. If you are below this minimum score, you will likely run into issues.
Phone contracts may also be an issue. However, not everything that you hear may be true. ‘5 common myths about phone contracts‘ by the people at Clearscore explore this in greater detail.
Another major impact can also be the ability to find good employment opportunities. An increasing number of employers are requiring credit checks for their new hires. Depending on the job, many employers look to the recent financial history of prospective employees to demonstrate a level of responsibility to the potential employer.
The job finding experts at Monster look closer at this in their article ‘How Your Financial Past Can Hurt Your Job Search‘
A lesser know impact relates to the ability to obtain a low rate with insurance companies. For example, if you are trying to get a car insurance policy, your rate/policy will likely be severely impacted by a negative credit score. This could also apply to your home insurance.
Insurers typically use the person’s credit score as a significant indicator as to how responsible the driver will be while on the road. Drivers with bad credit can usually expect to pay more than those that have better credit.
As you can see, a lot of different factors can influence your overall credit score. It is best to avoid all of them. Below we will talk about some of the things that you should do your best to avoid in order to keep your credit score as high as possible.
The first thing that you should always do is try to eliminate your debt. You need to work to eliminate your debt as fast as possible because bank and credit card companies are likely to be very nervous about lending you more money if you are already financially stretched thin. You can achieve this by getting a second job or cutting back on variable expenses.
It is also important to avoid ever paying your bills late. Late payments are one of the things that lenders really take into account when they are determining whether or not they are going to be willing to give you financing. Always pay your bills on time – no matter what.
When you actually apply for credit, it will show as a record on your actual credit report. Therefore, it is better to not submit lots of different applications all at once. It would be wise to stagger your applications over a period course of time.
Please Note – It’s important to remember that whilst it may take some time, nothing is set in stone, even your credit rating. Over at the excellent ‘nerdwallet’ website, they take a look at some of the best tips to help build credit in the following article – https://www.nerdwallet.com/blog/finance/how-to-build-credit/
By following the tips above, you should be able to significantly increase your overall score. Be sure to avoid getting into bad habits. You have seen how much of a negative impact a low score can have on your life. Do not let it happen to you.
The following Which? article explores some of the reasons why you may have a poor rating – http://www.which.co.uk/money/credit-cards-and-loans/guides/your-credit-report-explained/why-do-i-have-a-bad-credit-rating-/