Are you applying for a loan, credit card or debt finance option but facing issues getting approvals? In the UK and across the globe, your eligibility is determined based on your credit score, which is calculated using several vital parameters. However, getting a good credit score is difficult if your overall income is low while your credit requirements tend to be higher than what is expected.
For low-income families and households, there are a few steps that can be taken to help boost the credit score. If it is hard to get the required credit from a bank or a large financial institution, one can explore a credit union or other credible options. However, do not make the common mistakes most people would make, as this could damage your credit score.
Before you proceed, check your credit score free of cost to know where you stand. Once you know, you can make financial decisions that are healthy for your overall credit profile.
Here are a few tips to not just boost your credit score, but also ensure you are not doing anything that is the reason your credit applications won’t go through:
Pay Off All Your Debts
Are you thinking of applying for a loan or a credit card? Whatever the financial instrument you opt for, your credit score will be the crucial factor to decide whether you can get it or not. And if you have existing debts, then be sure that the chances of this happening are thin.
This is because existing debts is seen as a liability by the Credit Reference Agencies (CRA) and lenders. Existing debt means the person is more likely to default if he has too many debt finance payments to make, and no lender wants that. So make sure you are paying off all your debts in time to boost your credit score.
Don’t Miss Or Be Late With Your Bill Payment
Every family has a few basic needs; electricity, telephone, and other utilities being some of the many requirements. But if you find it difficult to pay off some of these bills, cut down on your needs and ensure you are paying every bill on time. Why would it matter, you ask?
Your outstanding bill payment for existing credit is flagged, but utility bills are too! So if you have a history of late payments, that will impact your credit score severely. In case you are falling short of funds for a particular month, get it converted to easy payments or pay a small fine to get the overall payment date extended.
Get A Low-Cost Credit Card, But Keep Your Usage Within Limits
Get yourself a low-cost credit card, that has minimum basic requirements and can be provided to even students, non-working people and low-income families. Having a credit card that is always paid for each month will help to increase your credit score. However, be sure to limit your usage.
Although you will be tempted to increase your limit or max out the existing one, know that this will influence your credit score. The people who use 50% or lower of their credit limit get a higher credit score than those who are using the entire limit each month. And this counts even if you pay your total bills on time!
Do Not Send Multiple Applications To Several Institutions Simultaneously
Although times may be desperate, avoid the temptation to send an application to several credit lenders. CRA is not entitled to information of knowing whether your application is accepted or pending. However, they can see how many applications were made, which is generally considered to be a red flag.
If you wish to increase your credit score, keep your credit applications to a minimum. Research your eligibility before applying for any financial product, and make sure you avoid it altogether till you reach a certain credit score.
Don’t Change Addresses A Lot
Most families in the UK live in a rented apartment and rarely have a house of their own. However, even though you may not have a property of your own, changing addresses too frequently can impact your credit profile.
So even if you are living on rent, make sure you find yourself a place that suffices your needs for the long term. And if it is absolutely necessary to change addresses, make sure that this is reflected in your documents and you inform the bank as soon as possible.
Register For Voting
Are you a UK resident or eligible to vote after staying in the UK for enough years? If the answer is yes and you are not registered to vote, know that this is impacting your credit score.
This is because when you are registered to vote, it is easier for lenders to confirm your identity, which, in turn, makes it easier to get a loan or additional credit.
If You Have A Joint Account, Make Sure Everything Is In Place
Do you have a joint financial account with a former business partner, a relative or an ex-spouse? If this was for a former business or another purpose that is no longer required, make sure you close it right away. Inform the CRA by lodging a notice of disassociation, and you’ll be good in the lender’s books.
Any activity in a joint account will be traced to you and can impact your credit score. So while you disassociate with an account that no longer serves the purpose, ensure there are no outstanding debts in them. Make sure you and the other person associated with your joint account take the required financial decisions to not be in the bad books of lenders.
Get Your Credit Reference File And Have Any Errors Corrected
Finally, if the above steps still don’t improve your credit score, it may be because of something in your file. So check all the details and report any incorrect information immediately. You can write to the CRA to ask for this document and get information added or changed.
Some of the items in this list could include past payment defaults, a fraudulent credit application that may have been made in your name or legal litigation. You may add additional information, e.g. the result of the litigation if it is in your favour, or documents showcasing complete payment of your outstanding debt with the CRA to help increase your overall credit score.
Ready to boost your credit score and get some of the best debt finance options despite being a low-income family? Then the very first thing you need to know is where you stand. Get your credit report uk and analyse your credit score to take appropriate actions today!