How to boost your credit score?
Credit is something that you take from a lender at an agreed rate of interest. It could be taken for various purposes including personal, home and medical but it is not always that banks will approve your credit. One should boost up the credit score for better deals with financial institutions.
The chances of getting credit depend more or less on your credit score.
The quality of your credit score is defined by your bank account and financial transactions among other things. A credit score is the score or rank given by credible companies or financial institutions wherein they analyze the client’s credit history. Based on this, a customer gets a credit score and helps the lender know the creditworthiness of the borrower.
Consequently, this score determines the level of difficulty that you might face in availing of a loan in the future. The better the credit score, the better the chances of getting your loan cleared with ease. Additionally, a bad credit score can keep you from accessing a line of credit to buy your dream home, finance your education or even land a good job. Therefore, it is mandatory to build a good credit score.
Herein, we are trying to help you by giving a comprehensive credit builder loan guide because getting a good credit score requires time to build. This credit builder guide seeks to provide you a glimpse of how credit scores are determined, what is credit building, what are the different things to keep in mind to build a credit score, some quick tips to evaluate your credit history and many more.
What Qualifies as a Good Credit Score?
Each CRA has a different credit score requirement according to their respective systems and methods.
- Transunion defines 4 as a good rate from an overall 5
- Experian defines 880 as a good rate from an overall 900
- Equifax defines 420 as a good rate from an overall 700
In the UK, these are the 3 main Credit Referring Agencies that store all of your credit information and history to create a specific credit report for you. These reports contain given ratings or scores based on the defined parameters.
Why is credit building necessary?
A person applies for a loan to buy a new product or repay the existing debt. Therefore, the situation is grave when the credit is demanded by any financial institution. In this situation, it is necessary to have a good credit score otherwise it can lead to adverse consequences. Hence, credit building is necessary because:
- Banks or financial institutions can outrightly deny your claim for the loan due to a low credit score.
- A high-interest rate is charged from the person as the chances of non-repayment increases due to low credit history. This is charged to keep a safety buffer.
- A long gestation period loan is denied to the person due to the bank’s own safety policy.
How to Boost Your Credit Score?
If you are not able to obtain a loan or partake in other credit borrowing activities, it is beneficial to know how to build your credit score. Although this might seem like it’s beyond your reach, there are a few factors that can improve your credit score as listed below.
Prove Your Identity By Registering On Electoral Roll
The first step of how to build your credit score is by registering yourself on the electoral roll (which can be done online). This, in turn, will prove your identity and verify your address. Some agencies give you a bonus in your credit score solely for the purpose of having yourself registered.
Make Your Particulars Errorless
Go through your credit file to look for faulty areas or for any details that need to be corrected. Changed address, phone numbers, etc should be updated on time. Contact your lender to change or correct the mistakes in the information you have provided.
Do not neglect any mistakes on your credit file as it will show a sign of casualty and unprofessionalism in terms of your financial activities and will make it seem that you are a less reliable person.
Monitor Payments That Seem Fraudulent
It is necessary for you to always look out for deceitful activity in your credit file. If you see any suspicious payment or credit has taken which lacks your approval, contact your CRA soon and let them know. In this way, your money lenders won’t roll down your numbers unnecessarily, when going about how to build your credit score.
Settle Your Debts Before It’s Too Late to boost your credit score
Making your payments on time and settling debts is the best way to delineate loyalty to your granter. Keep a track of all your pending payments and maintain punctuality in your credit file.
Another important thing is how to build your credit score is that late payments are shown on your credit reports for up to 6 years. It is better to pay back the loan amount on time rather than to have these bad remarks on your report which can directly affect your credit score.
Remove Ex-Partners Or Relatives from your Bank Account
Having a joint account may affect your credit score adversely. If the person with whom you hold the joint account has a low credit score, there is a chance that your lender might notice and reduce your credit rating too. When going about how to build your credit score, if you have a joint account, your partner’s ability to repay might affect yours as well.
Retaining A Healthy Credit Background
When learning how to build your credit score, always remember that honesty is the key. Proving your trustworthiness is not a one-time task, you will need to be reliable for the entire time until you repay the loan amount. From the first payment to the last, punctuality has to be maintained.
Stay Within The Credit Limit
To get a good credit score, manage to pay within your boundaries. The lesser you exhaust your credit limit, the higher your credit score will be. 25% usage of your credit limit is considered good and reliable. Lenders not only see your history but also your available credit.
Make Sure Your Lenders Remove The Black Mark
Any failure to clear outstanding loans or debts will cost you as lenders will perceive you as a defaulter and a County Court Judgment (CCJ) can be filed against you in the case of forgotten payments. Under such circumstances, you are usually provided 30 days to repay the amount due. If the amount is paid off within 30 days, the lender cannot add the CCJ complaint to your credit file.
What are the ways that can be used as credit builders?
Credit builders are varied in number. Some of the ways that are classified as credit builders are:
Credit builder loans
These are the loans that can be taken without any credit history. Banks provide these loans to new customers to build their credit profile along with lending the money to them. Under this loan, the banks keep the amount in a bank account while you make the payments.
Share or certified loan
In this type of credit-building exercise, the bank freezes your money in the bank account and keeps it as a collateral. And later this is released only when you repay your loan amount fully. This keeps your credit profile in check. So if you have funds at a financial institution then it may be worth asking if you can borrow money on that funds or not.
Secured credit cards
These credit cards require a certain amount of security deposit to be kept with the bank so that if you have increased your spending then it can balance with the security deposit. Thus, it saves your credit score from going bad.
In a nutshell, these credit builders are extremely helpful in bringing back your credit score to an acceptable range. With all the above available options, you need to pick the best fit for yourself and get your score building.