HOW TO MANAGE FINANCES FOR POOR CREDIT SCORES
If you have ever used credit in the UK, you will have a credit score. UK lenders will check information that’s held on you with one or more of three main credit reference companies: Equifax, Experian and Callcredit. These companies construct credit reports, which are a detailed, personal, financial history and from this they construct a credit score. This credit score will determine the ease with which an individual can obtain a mortgage, car finance or a personal loan. Credit scores are also checked by landlords and by potential employers. Individuals with a good credit score will pay less for the money that they borrow, conversely, individuals with a poor credit score will pay more for the money they borrow or may even find themselves unable to access credit.
Check your credit score and credit report before you apply for credit and ensure that it does not contain any errors. If your score is low, you need to take action to improve it so that you can pay less for the money that you borrow.
- Credit building cards
These cards have a low maximum spending limit, but significantly, they are available to people who might not get accepted for a standard credit card. They have a higher rate of interest than conventional cards, so you need to pay off the balance each month. Before settling on one, compare the features of different cards in order to make sure it’s right for you. By meeting the monthly repayments regularly, you are demonstrating that you are able to manage money and as a result you are able to boost your credit score.
- Register to vote
Being on the electoral roll is key evidence of your identity and improves your credit score. If you are not on the electoral roll you may find it difficult to get a loan, a credit card or insurance.
- Try to avoid moving regularly
Most of us change addresses from time to time, either for work or personal reasons, but you need to be aware that an unusually high number of changes of address suggests instability and will adversely affect your credit score.
Each time you apply for credit, a search is performed and recorded. Multiple credit card applications within a short space of time makes you appear desperate. If your application for a credit card is declined, do not immediately apply for another, it will only make a poor credit score worse.
- Ensure that household bills are in your name
If you house share and the bill is in someone else’s name, even though you are paying the bill, then they, not you, will be benefitting from the enhanced credit score.
- Close joint accounts that are no longer in use
Lenders don’t like you to have access to too much credit because of the increased likelihood for you to fall into debt. In the case of joint accounts, lenders look at both credit reports when assessing your credit score, so your partner’s or former partner’s, poor credit score could adversely affect your credit score.