Having a good credit rating is more important than ever. It helps you when it comes to obtaining a mortgage to buy a house, signing up for finance to buy a car, or applying for a loan or credit to give you some financial breathing space when times get tough. Having a low score can severely impact your financial freedom, but the good news is that it is possible to improve your rating. Find out what your credit score is already and then follow these three steps to get your rating back up to where it should be.
Identify your lines of credit –
Identify how many credit lines you actually have, such as loans that you have taken out, a mortgage, or credit cards that you might be using. People tend to think that having no lines of credit is best, but actually, if you don’t have any at all, that might mean that you do not have a credit rating.
Not having any credit isn’t good either and severely hinders you if you ever want to take out a loan or line of credit in the future. If you do not have a single line of credit and want to build up your score, a good way of doing this is by taking out small payday loans, which are manageable and quick and easy to payout, or applying for a credit card. Make sure to use these lines of credit responsibly – remember that the goal here is to build your credit rating up and not to go into debt, which will hinder you in the long term. Also, make sure not to have too many open lines of credit as this makes it look like you cannot manage your finances well.
Pay all of your bills on time –
As your payment history is 35% of your credit score, you need to make sure that you are paying any outgoing bills on time. Once you start doing this, your credit rating will slowly begin to rise. If you are forgetful at remembering your due dates, why not put them in a Google calendar to give you an automatic reminder whenever it’s time to pay a bill? You can also set up direct debits for all of your payments, which will go out automatically each month, meaning that you’ll never miss a payment again and won’t have to stress or worry about paying it on time either. Late bills are such an easy thing to tackle that it would be a shame if this were the reason why there is a massive dent in your credit report. Get organised and see your score quickly rise.
Clear your debts –
Debt is the number one enemy when it comes to all things finances and definitely when it comes to your credit rating. If there is one thing that you do for your finances this year, make sure to make clearing your debt your number goal first and foremost, as removing it will help your score to rise. Come up with a debt repayment plan and do whatever you have to, to lower it. This is, of course, easier said than done depending on the amount of debt that you have, but if you really focus, the short term sacrifices will be worth it in the long run for your long term financial goals. Even if you can’t pay everything off in one go, paying it slowly but consistently every month will go a long way towards improving your credit score and overall financial health.