When it comes to deciding how likely you are to repay a loan on time, or even whether they should grant you a loan, lenders look at your credit score. This a three-digit number that can help them assess the risks of lending to you. The higher your score, the more likely they are to offer you a loan.
You are not alone if your credit score is less than favourable. However, there are some steps that you can take in order to improve your score and increase your chances of being accepted for a loan
Before you start trying to improve your credit score, it is a good idea to check what it actually is. There are a number of places online where you can do this.
1.Pay bills on time
When lenders look at your credit report, your reliability in paying all your bills is one of the things that they are really interested in. Your past payment performance is considered a good indication of how likely you are to pay bills promptly in the future. This is a very quick and simple way in which you can improve your credit score. If you pay late or pay less than you originally agreed to pay you can have a negative affect on your credit score.
2.Ensure some bills are in your name
Bills really are a great way of showing a lender that you are reliable and that you can pay money back promptly. If your name is not on any bills, then you need to consider sorting this out as a way to boost your credit score. A mobile phone contact counts as a form of credit so this is ideal. If you live in a shared home, even if you contribute to the bills, if your name is not on the bills then you won’t get a boost to your credit score.
3.Use your credit card
You might think that buying things on your credit card will have a negative effect on your credit score, but as long as you ensure that you pay of the balance on time it will actually help to improve your score over time. So, with this in mind use your credit card, buy little and often with it and then make sure that you pay the balance off every month. Just like paying your utility bills promptly this will help to establish that you are willing to pay back any money that you have borrowed promptly.
4.Dont close credit card accounts you don’t use
You might think that one way to improve your credit score is to remove any credit cards you don’t use. However, this may actually work against you. As long as these cards are not costing you any money, simply remove them from your wallet. Closing them may increase the credit utilisation ratio you have – having fewer open accounts but owing the same may lower your score.