What's the score? How to improve your credit rating

What's the score? How to improve your credit rating

More and more borrowers are starting to realise the importance of maintaining a healthy credit history. It comes as no surprise to learn that a poor credit rating can have a profound effect on your well-being. As a result of an unfavourable score your borrowing options will be limited, high interest rates imposed and general costs of servicing your debt will go up. It's time to take action and make sure that you will be able to borrow money at the most competitive rates when you need it.

Credit score is a benchmarking tool designed to measure your creditworthiness and potential risk to a lender. It is based on multiple factors. Your income works a starting point and indicator of how much outstanding credit you can accumulate. It is closely followed by other factors such as: the length of your credit history, whether your payments to creditors were on time, declared bankruptcies etc.

If you have been refused a loan recently, you will need to look for ways to improve your rating. On one hand, not having any registered debts in the past can have a negative impact. Oddly, the credit industry feels more comfortable dealing with people who have a track record of paying off their debt. Don't make too many applications for credit in a rush, lenders interpret that as desperation. Space them out, it takes time for a credit history to gain momentum. Also, you might consider getting on the electoral roll whilst waiting for your credit history to build up. It is a proved countermeasure against any mix-ups with your address details.

Before applying for a new loan it is worth dwelling on your credit card situation. Don't keep too many credit cards and that includes department store cards, grocery store cards, petrol cards. The reasoning behind it is that credit card limits reflect the total amount of revolving credit available to you. The more credit you have available to you, the less credit you will be able to qualify for. Conversely, not having any plastic on you may also damage your score. Remember that by closing down your old card you will automatically erase all history lodged against it. The trick is to have two or three credit cards: use them but make sure you pay off the balances on a regular basis.

Check your credit score regularly. Keep track of all fluctuations in your score and try to determine a rationale behind it. It will allow you to react timely to any adverse changes and will save you a hassle when getting a loan. Requesting a free credit report is relatively simple and can be done almost effortlessly over the internet. The trick is to never underestimate the importance of a good credit score: the ball is in your court now.

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