One of the most essential & deciding factors for money borrowing is your credit score. When a bank or any financial institution determines a specific score for your lending, it is usually termed the credit score. It displays your trustworthiness as a borrower. In addition, it shows how reliable you are in avail of any loan.
You may check your credit score at different places. However, the thumb rule is to check it at regular intervals. Do not delay in checking your score, as there may be variations after some time.
Usually, lenders prefer borrowers who have a good credit score. Along with this, specific other parameters need to be checked. However, the prime parameter stays the credit score.
Credit score for Loan
You are considered a good borrower with high credit scores. In addition, you can get a loan at better terms & conditions and better interest rates.
With a bad credit score, there may be specific difficulties in getting your loan. In times of need, if your score is not in favour, you may even have to do a lot of struggles to connect with a reliable lender.
Repayment of the loan borrowing is also a challenging task. You may get the loan the first time, but you must also repay it to stay eligible for further loans.
There may be situations of financial crisis when it becomes challenging to meet the repayment schedule. Many debts get pending repayment. In such a situation, you can avail of one single loan and repay your earlier debts.
In the UK, these are known as debt consolidation loans for bad credit that too with no guarantor to help you consolidate all your existing debts. This also impacts your credit score and makes you eligible for further loan needs.
Some tips to improve your credit score
By now, you know the importance of credit score for your loan-taking ability. Some tips which will help you to improve your credit score are:
- Prove where you live
It is essential to confirm your address and give proof of it. Sometimes giving your accommodation proof can work in your favour. The lender treats you as a permanent resident and lends you money in good spirits.
- Make regular payments on time
Making the repayment schedule is imperative. It helps to improve your score. You will prove that you are a trustworthy borrower. Good repayment history earns the trust of lenders and makes it easy for you to get loans.
- Keep your credit utilisation low
For instance, if you have a limit of £4000 and use £3000 out of it, your utilisation comes to 75%. Higher utilisation is never considered a good sign by the lender.
Try to keep your utilisation percentage low. Never exhaust the total limit, as it will impact your score. Ideally, keeping your credit utilisation below 30% becomes favourable for your credit history.
- See if you could get an instant score boost
Connect your current account with your credit account. This shows how well you are managing your money. To know further, you can check with a credit rating agency and find out about the score-boosting ways.
- Check for errors and report any mistakes
Mistakes and errors in your credit report are possible. It may not be because of your mismanagement, but it can be because of a typing error.
Any such mistake may lead to a reduction of scores in your credit report, and the lender can refuse a loan to you. Check for any such error in your report and get it rectified immediately.
Keep the information up to date. If you have found a mistake, immediately report it to the agency for correction. For this, send a notice of correction to them.
- Monitor your credit file for fraudulent activity
Keep a vigilant eye on your credit report. Fraudsters can have access to your account and may miss use it. If you haven’t done it, it can be fraudulent activity on your account. Immediately report it and apply for it. Any unrecognized activity is a fraudulent activity, and does not be a victim of it.
- Avoid moving home a lot if you can
For the perfect score, do not shift your home often. Permanent address proof speaks a lot about your credibility.
People who keep on moving their houses can face a problem in the context of their borrowing. Also, they may face paying rent because of their low credit score.
- Reduce your debt
Whenever you are on the path of building up your credit score, work on reducing your debt from every source. Sometimes you over utilise your credit card and do not know about it.
This may be your credit utilisation or your credit mix. Consider everything and repay your debts as soon as possible. Many people forget this aspect and keep on utilising their credit cards. This does not help but instead puts them into the problem.
There is quite a common scenario where you end up having many old and smaller loans pending closure. For such situations better to take another new loan to close all the past pending loans simply. Bad credit loans with guaranteed approval can be taken by direct lenders. Thisway, you can finish off multiple loans, have one repayment schedule, and that too a new one, hence more time to repay.
- Get a co-signer
A co-signer can help you to get out of your financial crisis. Sometimes you may have friends or family who can co-sign and help you to get rid of the situation. They can become the co-signer and help you avail of your loans.
The benefits of improving your credit score:
Whenever you are working for a higher credit score, it is very helpful for your loan borrowing. As soon as there is an improvement in your credit score, it indicates your credibility and responsibility towards the lender. Most lenders prefer such borrowers and offer them loans easily.
01. Higher credit allowance
With a higher credit score, you are loud with a higher limit. People with a low credit score or generally offered lower loan amounts. They may need more than the smaller amount to fulfil their significant responsibilities. However, with a perfect score, you can get a good loan amount that can help you to purchase a car or for your home renovation.
- Lower interest rates
The perfect score also indicates lower interest rates on your borrowing. It also shows that you have successfully closed the previously taken loans in the stipulated time. This shows that you are trustworthy and have earned the trust of the lender. In addition, let you grab better deals with lower interest rates.
Conclusion
A credit score is a crucial aspect of any kind of borrowing. If people are not able to maintain their scores, they are ruining their borrowing capacity. Try to maintain it at a certain level if there are better ones.
The above-mentioned ways will help you to maintain a desirable score. Also, it will bring you to the good books of the lender and make you reliable and trustworthy.
Jessica Rodz is the Senior Content Writer at Cashfacts. She has a long career in the field of content writing and editing. Jessica has the expertise in the UK lending marketplace where she has worked with 7 different lending organisations and acquired many responsibilities from preparing loan deals and writing blogs for their websites.
At Cashfacts, Jessica is managing a team of experienced loan experts and doing a major contribution in guiding the loan seekers via well-researched blogs. She has done graduation in Business (Finance) and now currently doing research papers on the UK financial sector.
