In some respects, traditional lenders have tightened their criteria following the financial crash of 2009, particularly when it comes to secured mortgages. As of last year, more than 20 million people risked being rejected for mortgages as a result of poor or limited credit histories.
This can be particularly damning for aspiring first-time buyers, who may struggle to gain a foothold on the property ladder without a positive credit score or proven history of loan repayments.
Prevention is often better than cure when it comes to avoiding bad credit, but whatever your circumstances you’ll be able to repair your score over time. Here are some steps to help you on your way.
Pay your Debts on Time
This may sound obvious, but credit scores can be adversely impacted by late or missed repayments no matter how sporadic they may be.
It’s therefore crucial that you commit to making your repayments in full and on time every month, while also alerting creditors to any financial difficulties that you may be experiencing.
So long as you’re open and upfront about your issues, lenders will usually work with you to arrive at an amicable solution. It may be sensible to change the date of your payment if your circumstances change, for example, while creditors may also allow you to take a payment holiday if you suddenly find yourself out of work.
Regardless of your concerns or issues, address them directly and take every available step to avoid having a missed payment on your record.
Check your Credit Report Regularly
In some instances, you may find that you have issues on your credit report that are absolutely no fault of your own. These may even be due to simple administration errors, or the failure to update your report with the latest information.
In 2016, an estimated one-third of complaints made to the Consumer Financial Protection Bureau (CFPB) revolved around errors on credit reports, including debts that had already been settled and address input mistakes.
Similarly, your credit report may not show you as being on the electoral role if you’ve recently moved, and this can have a surprisingly detrimental impact on your credit report.
By regularly reviewing your report and proactively looking to correct any errors, you can incrementally improve your score and the quality of information that you provide to potential lenders.
Don’t Take on or Apply for Too Much Debt
On a final note, taking on too much secured and unsecured debt can make your financial liability unmanageable over time.
This can place a significant strain on your ability to organise and execute payments on time, causing your credit score to decline over time.
Applying for multiple lines of credit can also impact negatively on your score, as failed applications may serve as a black mark against your name.
This can also be extremely off-putting for lenders, who may consider you to be over-reliant on credit and less likely to repay your secured or unsecured debt in the required time frame.
Avoiding a debt can sometimes become a real struggle depending on how your lifestyle is. If you, however, can’t change the lifestyle you have or the way you overly spend over things the above tips can help you in going through or preventing it. Always try to check your credit history and if you are able to pay any debt in the future.