How to Improve Your Credit Score
Having bad credit will reduce the life options available you. You’ll find it difficult to acquire a home loan, a car loan or get finance to start a business. If you have bad credit the process of improving your credit will take months, if not years. If, however you don’t start working towards a positive credit history, it will never improve. These following steps are to be taken if you wish to improve your credit.
- Get your credit history. This is available for free through Veda if you’re willing to wait. For a small fee you can obtain it instantly. Have a look at the type of information on it. People are often surprised by how little info there is.
- Check it for inaccuracies. There are occasionally errors on a credit history. You need to dispute these with the organisation that lodged the entry.
- Stop applying for credit. The more you apply for credit the more it seems you need the money. The first rule of banking is – don’t lend to anyone who needs money. If you are shopping around for credit ask that they don’t make a credit history enquiry. When you’ve decided who you will go with allow them to make an enquiry. As a rule don’t apply more than twice a year.
- Don’t apply for certain types of loans. Be discerning. A loan from a payday lender or appliance rental provider is a red flag that you have experienced problems your finances. This goes for non-conforming mortgages and “second chance” car loan providers as well.
- Make all your payments on time. Automate your payments with direct debits and automatic transfers. If you don’t have the money, call your bank before your payment dishonours and work out a payment arrangement.
These aren’t technically included in your official credit score but are taken into account.
- Demonstrate balances reducing. Banks want to see you borrow and then the balance reduce. If the amount of credit you have is always increasing this is bad sign.
- Reduce your credit card balances. Banks use the credit card limit when they assessing borrowing capacity. If your limit is $10,000 but only owe $1000, banks will do their calculations assuming you’ve used the whole $10,000.