5 Simple Rules to Improve A Bad Credit Score

What do you do when you need a medicine urgently? You go and buy it. Right? Similarly, how do you feel about not getting a home loan that promises a dream lifestyle? You may feel irritated and exhausted with constant rejections. However, making multiple applications would not help.

Instead, check the reason behind the disapproval. In most common cases, it happens due to low credit scores. Mortgage is a long-term agreement demanding commitment from borrowers. However, pending bills, CCJs, and missed payments reveal irresponsible behaviour. Experts disapprove of it due to fear of losing money. How long can you wait to save enough to buy something you want?

Instead, make baby steps by working on your credit score. Improved one highlights your efforts towards responsible financial management. Check your credit report every month and plan payments. Identify the aspects affecting your credit score. It could be unnecessary expenses, too much credit card usage, or impulse buys.

Controlling such aspects boosts your credit rating. There are other rules, too, that may help you gain the right financial trajectory. Following these will help you understand your finances better. It will lead to more mature and futuristic decisions. The blog discusses this in detail. Read to know further.

How do you increase your credit score quickly?

One of the simplest rules for keeping your credit score healthy is balancing income and expenses. Ensure that your income remains high in comparison to the monthly spending. Moreover, try to keep additional costs akin to zero or regulate it well. It prevents your credit score from dropping.

You can do that by preparing a budget and sticking to it. Certain aspects, like changes in income and needs, may require you to create one again. However, do the changes and prevent additional costs. Here are other rules to increase your credit score quickly:

Prove yourself as a legal citizen

You cannot get a loan or insurance unless you are a legal citizen of the country. Every expert requires one to prove their identity to get one. Aspects like having home ownership, and a long-rented home increase the prospects of getting one. However, if you are a citizen but lack sufficient income and credit, the electoral roll may work.

Applying for one increases your credit score by 50 points (according to Experian). It reveals you as a reliable borrower. You may get loans for bad credit from a direct lender here, even with a part-time income. Use it for any legal purpose or short-term need without detailed documentation. Electoral roll-proof works wonders when you need cash urgently.

Reduce your credit usage

Loan providers, employers, and landlords check your outstanding balance. They also analyse how much credit you have available. Accordingly, they decide to lend, hire, and rent out the premises.
Aspects like too many credit cards, pending bills, and unnecessary subscriptions affect your credit limit. Generally, you must keep your balance below 30% of the available limit. It helps you boost your credit rating by 90 points. Alternatively, keeping the balance below £50 boosts the score by 60 points. Here is how to reduce your credit usage:

Make multiple payments monthly
Open a new credit card (if required)
Try to pay off dues early (if the authority permits)
Use cash over credit/debit cards
Pay high-cost payments first

Pay higher than what you owe on debts

Most individuals pay only a minimum of the whole amount on debts. It could be due to low finances, income, or more liabilities. However, if you are well-off and still paying less, then your credit score may be affected. It showcases that you struggle with carrying out debt payments. Hence, your credit score falls. Instead, do the reverse.

Try to pay more than the monthly instalment amount. It helps you clear the debts quickly and save on interest costs. However, certain overpayments may lead to additional penalties. Therefore, it is wise to ask your creditor before taking part in this initiative. Don’t proceed if you must incur extra costs to settle the dues early.

Consolidate if you cannot manage

Sometimes, merging the dues seems to be the most mature decision to handle debt. It is especially wise if your finances lead to debt roll-overs and penalties. Consolidation helps you reduce the total amount you owe on pending payments. It enables you to save money on interest payments too.

Begin with consolidating the debts with the highest interest costs and total payments. Check the total repayment period on the debts. If it is higher than a year, then you may consolidate. It will help you benefit the most. You can do so by taking up an unsecured personal loan.

Explore the best quotes and get if you can afford them. Individuals with regular income and improved payment history may get low interest on personal loans respectively. It is because the new aspect reveals that you can repay the dues without defaulting or skipping payments. Just make sure to choose the right repayment tenure for payments.

Don’t choose a too long or a shorter one. Instead, analyse your finances and select the one that helps. An ideal term enables you to manage the loan payments without affecting lifestyle expenses and basic savings.

Set direct debits for payments

To meet any of your financial life goals, you must reveal yourself as a responsible borrower. Timely payments on bills and prescriptions help you with that. Most individuals set reminders for the due payments. However, how would you manage if you have over 10 bills to settle per month? It indeed becomes an exhausting task. So, what you can do here is set direct debits for the payments.

It frees you from constantly keeping a check on the payment dates and releasing the cash. Instead, the creditor deducts the payment automatically from the respective bank account attached to the loan or credit card payments.

No, you don’t need to pay any fees to set direct debits. You can stop the facility if you struggle to save the required amount every month. You can consider this step-in phrase as a job loss, business loss, or inconsistent income.

Bottom line

These are some simple rules to boost your credit rating. Analyse what you can according to your personal finance situation. The best step to begin with is reducing unnecessary expenses. It automatically brings down the credit utilisation rate. Eventually, your credit score improves. Next, being on top of the debt payments and seeking solutions may help.