Having a good credit rating is incredibly important yet it is often an area that people neglect or do not know much about because they have not been taught about personal finance. Having a good credit rating will allow you access to financial products, such as loans or mortgages, which can be important when it comes to major life moments.
Not only this, but a good credit rating will allow you access to the better rates. A bad credit rating, meanwhile, can make it hard to take out loans and open up bank accounts and you will not get the best rates – this is a double-edged sword because this only makes it harder to improve your finances. Fortunately, there are a few effective strategies for improving your credit rating over time.
What Affects Credit Rating?
First, it is important that you know what affects your rating. Your credit rating demonstrates whether or not you will be a responsible borrower to lenders which means that factors like existing debt, CCJs, credit history (and lack of history), late payments and even how often you move home can impact your credit score.
There are some steps that you can take immediately which will help your rating. These include getting on the electoral roll, checking for mistakes or fraudulent activity on your file, closing down inactive accounts and closing joint accounts with anyone that has poor credit.
There are then various steps to take which will gradually improve your credit rating. These include paying your bills on time each month, paying off existing debt and using credit for small amounts but often to build a credit history. Over time, this will show that you are a responsible borrow and your credit score will improve which will allow you access to various financial products.
What to Do if You Have Bad Credit
It can take some time for your credit rating to improve which can be frustrating if it is impacting your daily life. Fortunately, there are often solutions available such as bank accounts for people with bad credit where no credit check is carried out. In addition to allowing you easy access to financial products, this can also help you to start to rebuild your credit score and be more intelligent with your personal finances.
Everyone needs to be aware of their credit rating even if they do not plan on using credit anytime soon. Knowing what your score is will allow you to make changes if necessary so that when the time does come to borrow money you should be approved and get access to the best deals. If you have bad credit then it can feel like a vicious cycle and that all is lost, but this is not the case as there are steps that you can take to improve your rating.