This is a guest post written by Money Supermarket, a UK based comparison site.
As I’m sure most of you will know borrowing money has become extremely difficult in recent years. However, there will probably be a time when you will need to be approved for credit, and when that time comes you need to be prepared.
Building your personal credit rating is simple; you need to show to possible lenders that you are trustworthy and reliable, because at the end of the day they just want to ensure that they’ll get their money back. If they have even the smallest of suspicions that you aren’t reliable then this could see your application rejected.
When you apply for credit when trying to purchase something, the lender you want to borrow from will perform a credit check on you to see how reliable they think you are. The better your personal score then the more chance you have of being approved. So, first things first you need to know what your personal credit score is.
Firstly, I would advise reading an earlier post on Little House in the Valley entitled “Obtaining Your Three Credit Scores” because there is some great advice there. Finding out your credit score will give you a great indication of how the lenders think you are doing financially.
When you receive your reports, analyse them thoroughly and make sure you know what all of the little details mean. If you’re unsure about any of the aspects of your report or if you think some of the data may be inaccurate, then contact the credit reference agency and get it queried.
Once you have your credit score it’s time to think about what you can do improve it. One thing to remember is that lenders don’t like things out of the ordinary, so one thing you should focus on is consistency. Always meet your payments on time and try to be as organised as possible.
Another thing you can do to improve your rating, is to monitor the total credit available to you, because the more credit you have in your name the worse your credit score will be – and this will look really bad to possible lenders.
Try to identify ways that you can cut down the amount of credit available to you, do you have credit cards open that you don’t use? Have you got an amount left outstanding on a loan that could you pay off? The less credit you have against your name the less of a risk the lenders will see you as.
To make sure your credit score always remains in a healthy state, you should never take on more than you can handle financially. If you do, this just elevates the risk of you getting into debt which will again have a negative effect on your score.
It’s important to keep on top of your personal credit score to watch the situation closely, if anything changes then ask why?
Building your credit rating has so many benefits, there will probably be a time when you will need funds for a specific reason and being refused is truly a horrible experience.
