In as much as you might be having legitimate excuses as to why you missed a payment or two in the past, lenders usually are not in the mood to hear your excuses. To them, you only have two options – their way or the highway. A lot of people with a poor credit rating have had to contend with rejections or high-interest rates because of a poor credit rating. In light of this, credit repair should be uppermost in your mind. You definitely do not want to suffer high rejection rates or deal with exorbitant interest rates for the rest of your life. So how can you go about rebuilding your credit score?
Never ever miss making a single payment
The reason you are in a mess right now and your credit score is in poor shape is because of missed payments in the past. As such, if you are keen on rebuilding or repairing your credit score, you should make sure that you pay all your dues on time without defaulting. Late payments negatively affect your credit score. Timely repayments show that you are reliable, trustworthy and diligent in meeting your obligations. Some of the strategies you can utilise to make sure you never miss a payment include setting up an automatic payment with your bank, setting reminder alerts on your phone or organising to be sent reminder emails every time your bill is due. Over a period of time, you will be able to positively impact your credit score.
Keep open your older credit card accounts
If you have an older credit account with a good credit history, it is advisable that you keep it active rather than closing it. The moment you close a good credit card account with a good credit history, it means that after a period of 10 years, the history will be deleted and there won’t be a trace of it on your credit report. Keeping older accounts active will therefore go a long way in helping your efforts to rebuild your credit score. In other words, don’t close good old credit accounts but rather keep them live!
Drastically reduce debt on revolving credit accounts
What most people are unaware of is the fact that lenders not only look at a person’s credit score but also keenly analyse a person’s utilization ratio. To put it into perspective, if you owe a sum of £5000 on a given credit card whose credit limit is around £10000. It means that you have in essence utilized up to 50% of your available credit. In other words, you have a 50% utilization rate which lenders find to be very high and which could in essence hurt your credit rating. As such, you should endeavour to reduce your utilization to below 30% on all your revolving credit accounts. Simply charge on your credit card what you are capable of repaying on a monthly basis without straining your finances.
Audit your credit report accounts
At times, your credit rating could be poor because of errors and incorrect entries. A lot of people are not privy to the fact that they can access their credit report for free once a year. In other words, you could actually check your credit report say every 3 or 4 months from a different bureau and ascertain whether the information contained therein is correct and factual.