It’s well known that having a bad credit record is detrimental to being able to find an affordable loan. As far as lenders are concerned, your credit record is a good indicator of your financial health. As such, lenders, who take a risk by lending to those who may default means that the APR rate of loans is typically very high. Repairing your credit score then, will go a long way to helping you access more affordable loans, allowing you to borrow and save money at the same time.
So, if you have bad credit, some simple steps you can take to mitigate the damage of a poor credit record, and improve your score are outlined here:
Order your credit report
Knowledge is power, so ordering a copy of your credit file is the first step. The big credit references such as Experian have a duty by law to provide you with your credit record, and it costs only £2.
Correcting your Report
Fraud and mistakes are some of the most common errors on a credit report, so examining your file for evidence of misinformation is essential. Even small mistakes can have a big impact, so check your report very carefully. If you do find any errors, the credit reference agency has a duty to correct them within 28 days. You are also allowed to add a note to your file explaining any defaults, known as a ‘notice of correction.’ However, be aware that a notice of correction can sometimes delay any credit applications you make, because the lender has a duty to read them carefully.
Pay Your Bills on Time
Yes, it might be difficult, but lenders are looking for evidence of a reliable stream of regular payments. Utility bills, council tax payments, credit card repayments, store cards, and recently, even rent payments are recorded. If you end up in court for non-payment of bills, a CCJ will have a serious effect on your credit rating, and make applying for any type of credit in the future virtually impossible.
Register to Vote
Registering your name on the electoral roll provides proof you genuinely exist and live at your address. This makes a big difference to your credit score.
Take out a Bad Credit Loan
Taking out a bad credit loan will help you rebuild your score if you repay the debt, but be wary of falling into further debt by making sure you can afford it. Credit rebuilding credit cards or guarantor loans are one answer, but guarantor loans are a serious risk and commitment for the guarantor, and the temptation to spend on a new credit card is also a risk. Peer to peer lenders often take a more compassionate and human approach to assessing creditworthiness, as well as offering a decent APR. So they can also be an option. As with any type of loan though, it’s vital to ALWAYS make the repayments on time to rebuild your score, and avoid accruing further debt.