Practical tips to help you improve your credit rating and avoid expensive high interest loans
The use of credit and debit cards is ingrained in our minds from a very young age nowadays. From going out with our parents to do the weekly shop, to filling up the car with petrol, to paying for lunch in the pub, these cards can be extremely useful to have and their use is commonplace.
The ease with which cards can often be obtained and used can potentially be quite dangerous if they are not used correctly. However, although spending more than you can afford to repay will result in mounting debt and expensive bills, if you use these cards sensibly, you can actually go a long way towards repairing a poor credit rating.
If this sounds like something that may appeal to you, read on to see how a credit card may be able to help.
A credit card is a plastic card which can be used to either pay for products and services or to withdraw money from a cash machine. They are typically issued by banks, finance companies, and some stores, charities and clubs and you can use them wherever they are an accepted method of payment.
Please Note – There is usually a display in a shop highlighting which cards they accept.
The excellent people at the Money Advice Service offer some great insight into how credit cards work. To find out more, please click here.
You will be allowed to spend up to a pre-agreed limit on your card, called the credit limit, and this limit will be decided based upon your individual financial circumstances.
Each time you make a purchase using your credit card, the amount will be added to your account with the outstanding figure being known as your balance. Generally, if you do not pay the balance in full within a certain period, the issuer of the card will charge you a rate of interest which will be added to the balance.
Find out more about pre-paid credit cards right here!
To ascertain your suitability during a loan application, lenders will look at a number of different factors but your recent financial history is likely to be right at the top of the list. A history of missed payments and mounting debt will be negatively reflected in your credit score and the worse your score, the less likely you are to have your application granted.
Whilst mounting debt is very likely to negatively impact your credit rating, the flip side of this is that showing an ability to repay the debt in full and on time can positively impact your rating.
For additional tips on rebuilding credit scores, please click here.
Working hard to make repayments on your outstanding balance will show potential creditors that you are serious about getting your credit file back in order and if you continue to do this, your ability to obtain credit will improve over time, resulting in better credit offers and substantial savings in money.
The good news is that your hard work is very likely to offer a variety of other benefits. The hugely informative LaToya Irby explores this in greater detail in her article – 9 Benefits of Having a Good Credit Score
For more information about credit ratings and how they work, please take moment to view the following video –