With all of the mess of the last year, many of us have seen our finances take a bit of a hit. While we’ve all been busy trying to get through the pandemic (or just watching Tiger King for the 3rd time) it’s no wonder that we haven’t kept up to date with our money as much as we probably should have.
Shopping on finance has become massively popular thanks to online shopping with Klarna, Laybuy, and our own personal go-to Duologi. Paying in instalments, especially after a year of almost exclusively shopping online, has been a lifesaver for a lot of us in lockdown.
But what do you do if you’re denied for finance? There are heaps of reasons why people are declined, but one of the quickest ways to check your eligibility is by finding out what your credit score is. If we’ve lost you, don’t worry. In this week’s blog, we’ll be going into exactly what a credit score is, and how you can quickly and easily give it a boost!
What Is A Credit Rating?
Basically, your credit rating shows how likely potential lenders would be to take you on. In a nutshell, your credit score is a quick snapshot of your spending habits that helps lenders predict your creditworthiness, and predict your future behaviour based on your past credit history. You can check your score pretty easily on sites like Equifax and Experian, and different lenders might score you differently.
To boil it down, the higher the score the better! There’s a lot of data that gets taken into account, like how many applications you’ve made recently, how much debt you have, what you have on credit and if you’ve paid them off in time, and what’s known as “hard checks” which is when large lenders take an in-depth look into your credit history.
You might be wondering how lenders get a hold of all this info, and there are a few sources that they take a look at. The application form, any past dealings you have with the lender, credit files from Equifax, Experian, and TransUnion, history from energy and phone providers, and lastly any fraud data.
There’s a lot to take in, but once you find out what your credit score is, you can start to see how you can improve.
1) Register To Vote
A very quick and simple way to give your credit rating a leg up is by making sure that you’re on the electoral roll. Not being registered to vote makes it much harder to be accepted for credit, so don’t wait for an alright candidate to apply! You can register online at any time, and it only takes a few minutes.
Just follow the instructions, answer a few questions about your local area, and make sure that you have your national insurance number handy. You don’t even have to opt for the open electoral register as credit reference agencies can check the full register, which isn’t available to the public.
2) Make Sure You Never Miss A Payment
This part might sound obvious since lenders base their decision to lend on whether or not you’ll be likely to pay on time, and in a way it is. It can sometimes be a struggle to keep on top of payments, but missing one can lead to massive problems that can affect you for years.
The easiest solution is to set up a direct debit, so you never forget to make a payment and end up running late. While you should usually avoid only making the minimum repayment, as it can lead to racking up pesky levels of interest, you can set up a direct debit that takes care of the minimum as a way to make sure you’re never late and just pay the rest manually as soon as you can.
3) Use A Credit Card To Build Your History
It might seem like a good way to get a great credit score is to not have anything on credit at all, but this isn’t the case. Credit scoring is all about using your past behaviour to predict how you might act in the future. Having a bad credit history isn’t great, but so is having none at all.
A great way to quickly build up a trustworthy credit score is to use a credit building card. These are cards with not so good rates, but if you use them each month for an amount you can easily pay off in full you won’t be charged for interest. This is brilliant for building a recent credit history, and within a year you can see a big difference. Just make sure that you never use your credit card to withdraw cash, and it can show poor money management to lenders.