A poor credit report doesn’t just potentially affect your chances of getting a mortgage, a loan or credit card these days, it can really reduce the chances of securing the right rental property. It can also impact your mobile phone contract, car insurance, bank accounts, and it could invariably lead to you being refused credit or being offered higher interest rates. A credit score is an estimate of your ability to fulfil your financial commitments, based on previous dealings. The consequences are wide-ranging and the strain they place upon our financial circumstances can be demoralising as well as damaging. What we need to remember though is a poor credit score can happen to anyone, at any stage of their life. And no matter how frustrating it may be, there are ways of addressing you credit file and improving it.
It is important to remember that there is no universal credit scoring system, all lenders have different ways to judge and assess applications for credit. From a loan provider to a mobile telephone company, to a sofa company who do higher purchase; there will be no specific score, rating or traffic light system that compares to another lender. PCCU understand credit is often an essential part of life for funding everyday essentials and major purchases. It is also an essential part of managing cash flow and budgeting peaks of expenditure.
Here are eight helpful tips when addressing your credit file
- Review your credit file, for free by clicking here, to check for errors. When doing this make sure to check using soft inquiries as this will not affect your credit score
- Make repayments on time. Payment history is one of the biggest determining factors in calculating a person’s credit score. Avoiding late payments is therefore crucial if we’re to keep our score high and healthy. This can be easier said than done, which is why, if you are struggling, you should contact PCCU.
- Deal with your delinquencies. Being late by more than one month is considered delinquent. A lender may not report a delinquent account to a credit agency until two or more payments are missed, so if you do miss one try your best to come up with an arrangement as soon as possible.
- Have any inaccurate things removed. Filling a dispute – for example, over a late payment – can have a big impact on your credit score. Whether it goes up or down though will depend on the outcome of the dispute. Late payments will generally stay on your report for seven years.
- Limit requests for new credit. When applying for a credit card, loan or mortgage, a lender will complete a comprehensive review of your credit history in order to determine how much of a risk you pose. This is called a hard inquiry. A single hard search is unlikely to have an adverse affect on your credit score. However, a number of them in a short period of time can be problematic.
- Reduce your credit utilisation. Your credit utilisation ratio is a measure of how much available credit you are using. For example, if you have a credit card limit of £1,000 and the balance is £600, that is a rate of 60%. You should aim to keep this below 30% through not overspending and ensuring credit card balances are paid off.
- Keep old accounts open. Closing down old lines of credit while you have a balance on other ones could increase your credit utilisation ratio.
- Prove where you live. Registering to vote will help confirm to lenders your name and address, which in turn should increase your credit score. Also, bear in mind that moving home regularly can give lenders the impression you are struggling with paying rent.
PCCU reports on a monthly basis to the credit agencies for all loans taken, which means if an account holder makes the correct payment on time their credit rating will improve. As a not-for-profit community financial co-operative, PCCU is committed to offering products and services that help account holders manage their money and build up a history of good money management.