The truth is, is that many of us struggle to maintain good credit, especially if we’ve recently hit a rough patch or challenging period in our lives which upsets our equilibrium, such as a redundancy or the loss of a loved one. Nevertheless, bad credit can be difficult to recover from, especially if you don’t know where to begin.
Unfortunately, your poor credit isn’t guaranteed to go away overnight by one using just one simple tip. Instead, you’ll have to actively work to get yourself out of the red and in some cases, this can take some time and perseverance, but did you know that you can significantly decrease the time it takes to see some positive results on your credit report?
If you want to start the New Year off on the right foot, taking you a better financial future this year, and boost your credit in 2019, then we can show you how to bring your score to a better level quicker. All by providing you with the beneficial tips and advice that you’ll need on the correct way to achieve your desired results.
So, in order to get your finances in order, keep reading to find out the best ways to rebuild your credit in 2019.
What Impacts Your Credit?
Firstly, we’ll start by explaining just how your credit and your credit score work, in order for you to get a better understanding of how you can boost your credit. Your credit is a record of your overall financial behaviour in the past dating back to the past seven years. A lender will be able to view your credit by obtaining a copy of your credit report from one of the three largest credit reference agencies within the UK, either Experian, Equifax or Callcredit. Your credit report is made available to lenders, so they are able to view how you have handled your financial responsibilities in the past, in order to make an assumption on whether or not you are likely to pay back your future financial obligations with as little hassle as possible.
Now your credit score is a number given to you by an agency which is derived from your financial behaviour which is documented on your credit report. Generally, the higher your score is, the more likely you are to be accepted for credit; however, your credit score is not always a good indication of whether you are likely to be accepted, as different lenders expect different qualifying criteria, meaning that even with a low credit score you could still be likely to be accepted by some lenders. Nevertheless, a lot of borrowers use their credit score as an indication of their creditworthiness.
By paying your bills in full, regularly and on time, your credit score will improve, and you will keep a clean credit record, however, if you fail to stay on top of your payments or neglect to take your debts seriously, your score will decrease. Your score is a reflection on how responsible and dependable you are as a borrower; therefore, good credit will come in handy and bad credit will be an obstacle when you try to borrow money, buy a house, or rent an apartment in the future.
How to Improve Your Credit
Now you’ve established what your credit is, how it works and presumably taken a look at your own credit score or report in order to access the main areas for improvement, and you can now get to work as soon as possible rectifying the black marks on your credit report with the following tips and tricks.
1. Pay off any outstanding debts
Firstly, you have to deal with the main problem in hand, and the most egregious of all of your financial woes is your unpaid debt. Debts are a substantial burden on your credit, and they can have a more significant impact than most would care to consider. In fact, if you’ve neglected to pay your bills and it’s gone into collections, then it won’t reflect kindly on you on your record.
That’s why it’s crucial that before you do anything else, you should start to pay some of your outstanding debts. You should ensure that this is your number one priority and strive to pay as much as you can back as fast as you can, obviously within reason. You’ll find that if you make yourself stick to your repayment schedule and stick to a budget, you should be able to successfully pay off your debts and improve your credit score while doing so.
For additional information on prioritising debt, you can visit The Money Advice Service for further guidance.
2. Pay your bills on time
Whether you believe it or not, bills are significant to good credit as well. For instance, if you neglect to pay your mobile phone contract or even a utility bill, it will make an impact on your credit and not for your benefit.
If you do have trouble keeping up with making repayments for your debt, then there are methods that you can enforce which will help you to combat that problem and here are just a few:
- Make a note in your calendar of your repayment dates.
- Set an alarm or calendar reminder on your phone.
- Set up a direct debit with your bank for your repayments.
Whether you prefer to have the payment taken from your account automatically each month through direct debit, or whether you prefer to make your repayments manually each month, it is absolutely vital that you ensure the payment is made on time.
3. Don't borrow more than you can afford to repay
If you do find yourself in need of acquiring money in the New Year while trying to improve your credit, then you must be careful, diligent and confident that you’ll be able to repay any money that you’ve borrowed. One way of ensuring that you’ll be able to repay back your loan is first to make sure that you can don’t borrow more than you can afford. So, make sure you steer clear from borrowing money with extortionate rates of interest, especially for a long duration of time, as this will generally make it more difficult for you and is an expensive way to repay your loan. It is vital for you not to borrow more than you can afford to repay as it increases the likelihood of pushing yourself further and further into debt, which will affect on both your credit report and score.
If you wish to work out how much you can afford to borrow, then The Money Advice Service has a free Loan Calculator tool which will help to work out what amount and what repayments you can afford each month.
4. Use personal loans to your advantage
One thing that a lot of people struggling with poor credit fail to utilise is personal loans. A trick that many people don’t realise that they do is to use debt to their advantage, but only under strict and controlled conditions. While out of control debt will obviously be detrimental to your credit, smart use of personal and short-term loans can help to swiftly and steadily increase your score.
This is because your credit is a reflection of your ability to repay your debts responsibly, therefore getting a loan in which you are sure is affordable and that you can count on to be reliable to repay in full and on time will reflect positively in your favour, assuredly a beneficial impact on your credit. You will be able to demonstrate to potential lenders your financial responsibility, proving your worth as a reliable borrower.
Therefore, in conclusion, many different ways are beneficial in helping you to rebuild your credit and improve your credit score in 2019. However, in order to reap the benefits from these advantageous tips and advice and boost your credit, it helps to have an incentive to work towards. Whether you wish to improve your credit in the New Year for something such as an imminent mortgage or the purchase of a new vehicle in which you may need credit to obtain; or whether you just want to improve your credit for opportunities that may arise in the future, it helps to have something to work towards to motivate you to reach your goal.