How to fix a bad credit rating

If you’ve applied for credit and been unexpectedly rejected, then this may have been caused by your credit rating. A credit rating is basically a summary of the manner in which you have managed your money and credit in the past. 

There is no single credit rating that every lender can use to make a judgment when it comes to your finances. However, there are a number of things you can look into in order to improve your credit score:

  • Make your payments on time to show a pattern of good borrower behaviour
  • Reduce some of the balances you currently have outstanding, even if only by a little.
  • Check your credit report regularly and make sure all the information is accurate. Look out for any activity you don’t recognise that could be evidence of fraud.
  • If you’re struggling with the debts as it is, don’t apply for more credit. Seek help in managing and paying off those debts first.
  • Wait at least six months before making any new applications for credit that will result in enquiries on your credit file. Wherever possible, ensure any credit provider uses a “soft search” to assess an application – then there will be no footprint on your credit file.
  • If you don’t have any credit history then apply for a credit card or personal loan, even if the interest rates are not favourable. Pay this off in line with the credit agreement to start to establish positive borrower history
  • Don’t overextend – apply only for the credit you’re likely to get
  • If you’ve shared finances with someone in the past but now gone your separate ways, make sure your credit file isn’t still linked to theirs. Remember, if they have a bad credit score it might affect yours too.
  • Check your credit history is accurate – for example, if you have a bankruptcy order annulled make sure that a copy of the order of discharge or annulment is distributed to credit agencies.
  • Try to stay put – lenders like long-term addresses, landline phone numbers and a solid employment history as all these provide evidence of stability.

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If you would like to explore the possibility of applying for a new loan, please feel free to use our complimentary Finance Assessment tool.

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