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Having a poor credit history can be a challenge and will often affect how successful you are when applying for loans, mortgages and other borrowing options.
When lenders carry out checks, one of the first things they look for is your credit rating and history. If they discover that you have bad credit or a low credit rating score, the chances are it will be more difficult to convince them that you are a suitable candidate for their product. The interest rate you are offered is often affected quite dramatically by your credit history, too. Generally, those with a worse credit history end up paying more than those with a better rating.
The first step to fixing bad credit history is to obtain a copy of your official credit report. There are now several providers who offer this service free of charge, though some may involve a subscription-based arrangement that is free for the first month. If this is the case, remember to cancel the recurring payment if you do not wish to continue to use the service after your initial checking.
Your credit report includes your credit score, which is based on your financial activity over the years. Things late payments, missed payments or arrears will all profoundly affect the score, so check to see if you have any outstanding issues on your report. Though it is generally quite rare, errors do happen so double check that your report is accurate as recorded missed or late payments to loan providers or credit card companies can severely affect your chances of being accepted for any kind of borrowing arrangement. Though it generally has less of an impact, things like out of date contact details or addresses can also be an issue, so taking the time to ensure all of the information held about you is correct is usually worth doing.
Unfortunately, a poor credit history can’t be fixed overnight and generally takes between seven and ten years to improve, though, after this period, it is possible to obtain an excellent score, providing you have kept up with all of the payments you owe to your creditors. In some cases, it is possible to improve your score more quickly, but this can involve paying a little extra to the organizations you are in debt to. If you have outstanding payments that have not been dealt with for some time, the chances are the credit card, loan company or other lending providers will pass them on to a specialized collections agency. When this happens, a record is created on your account, though it is possible to ask for this to be removed once you have paid the full amount. You can also speak to your creditors directly to negotiate a little leeway. Though this doesn’t always work, if you have only missed one or two payments and are genuinely back on track financially, some of them will consider deleting any negative information for a fee. Though this can mean you are paying a little more, overall, it does mean that your credit history is more likely to improve quickly, so if you have the means to do this, it can be a good option.
It may seem obvious but one of the best ways to fix a bad credit history is to ensure that you are paying all of your bills and debts on time. Even one or two missed payments can profoundly affect your credit score so making sure that you have things organized so that no payments are missed will make a huge difference. Things like direct debits, standing orders or automatic bank transfers mean that money will be automatically moved from your account on or before the day your payment is due. This can take a little time to set up but most banks now provide this facility online, you can also do this over the phone or in person. Once this has been done, providing there is enough money in your account each month, you won’t need to worry about making payments yourself as it will be taken care of for you.
Your credit score and credit history will change if you own a large amount of money to one or more lending providers. Though it can take time, reducing the overall amount of your debt will significantly improve your credit score over time. Try to pay as much as you can afford towards your debt each month and this will help you to start raising your credit score as the amount begins to reduce.
As a general rule, credit card debt is more expensive than other types of borrowing, but this isn’t always the case. Try to find out how much interest you are paying on each of your cards, loans or other borrowing arrangements and make a concerted effort to pay off the one with the highest rate first. Doing this will make a massive difference to your overall credit rating and also allows you to completely write off a particularly expensive area of your personal debt.
Though the main ways to improve your credit history are to try to keep up payments, deal with high-interest rates and ensure your details are all correct, there are one or two other things you can do to help yourself.
If you need to do things like balance transfers to keep the interest rate of your credit card debt to a manageable level, ensure that you don’t apply for several cards in a short space of time. Many lenders will see this as a negative thing because it can make you appear too eager and perhaps even a little resolute when it comes to financing matters. Instead, space out applications for things like loans, mobile phone contracts or any other long-term borrowing.
If you can, try and apply for credit that you are definitely going to be approved for. This can be tough, but it is possible. Rather than asking providers to run a full credit check on you, you could ask for a quote first. This will give you an indication of the interest rate you may be given and though this can be subject to change, it can be helpful information to have before you make a final decision.