Having a good credit rating is an important aspect in everyone’s financial lives. It shows lenders that you manage your money efficiently and increases your chances to be given a loan, credit card or mortgage at better interest rates. Credit ratings can also affect your car and home insurance, utility bills, mobile phone contracts and more.
If you have been turned down for credit before or been offered very high interest rates it’s most likely to be because your credit rating is low. The good news is that there are ways to help you give your credit rating a boost and we’ve found the most straightforward ones.
Check your credit file regularly
Ideally, you should check your credit file before applying for any type of credit and at least once a year.
Your credit file contains a load of information on you and your credit history but, as anything, it can have errors and inaccuracies that may be affecting your credit rating without you knowing it.
The quickest and easiest way to check your credit file is online. Some agency websites require you to pay a small fee but there are also ways of accessing your information for free.
Try and pay off more than just the minimum on your credit card
Although paying just the minimum fee still counts as paying your credit card it doesn’t do much to help you lower your debt or improve your credit rating, especially if you end up using your credit card more often than you should every month.
One of the components of your credit score is your credit card’s balance-to-limit ratio which measures how much of your available credit you are using. If you have a balance that’s over 30% of your credit limit then your credit rating might be affected. Paying more than the minimum fee whenever you can will help you keep your ratio under 30% and improve your credit rating.
Get on the electoral roll
Banks, credit reference agencies and lenders use the electoral roll as a factor when doing credit checks. This is mainly to verify your identity and address. Not being on the electoral roll makes it harder for you to be accepted for credit.
If you are not a UK national or eligible to vote in the UK, don’t worry. You can contact credit reference agencies and send them your proof of address so they can add it to their records and your credit file.
Avoid missing payments
Missing or making late payments can have disproportionate consequences on your credit rating and leave a black mark on your credit file for up to six years.
Setting up direct debits in your account is a good way to make sure all of your payments are in on time. With your Arro account, you can not only set up direct debits and standing orders for free, but you can also use your dashboard to check that your payments have gone out. However, if you find yourself struggling to pay, you can contact your lender to try and change your repayment schedule or payment amount.
Don’t withdraw money from your credit card
Withdrawing money from your credit card might seem like the easiest way to get cash quick. However, it isn’t only counterproductive but it can also lead banks and lenders to think that you don’t know how to manage your money efficiently. Not to mention the very high interest rates you will be charged for doing so.
Forget the scattergun approach when applying for credit
Even though credit reference agencies are not told if you are turned down on a credit application, every time a lender makes credit checks on you a note is recorded, leaving a mark on your credit file.
Too many credit searches recorded on your file, especially in a short space of time, can make you look like you are desperate for credit and hurt your chances to be accepted.
If you really need a loan, you can use an eligibility calculator before applying for it to help you know your chances of being accepted. There are many eligibility calculators online that you can use for free and that won’t leave a mark on your credit file that lenders can see.
As you can see, improving your credit rating is all about understanding how credit scores work and developing money management skills. If you are looking for a simple and straightforward way to manage your money then an Arro Early Access account is what you need. Opening an account with us is quick and easy, plus there are no credit checks involved; making staying on top of your finances a breeze.
If you want a simple, straightforward way to manage your money, sign up Arro Early Access now.