Here at Oyster Loan, we process hundreds of soft credit check loans for bad credit applicants every month. Most people use brokers because, although brokers don’t lend money themselves to borrowers, they know the lenders on their panel very well and they know what lenders want to see in both on a borrower’s application form and on their credit history file.
But what are the best ways of protecting and improving your credit score? In this article, the Oyster Loan team shares their seven top tips.
Be careful of identity thieves
Identity theft is more prevalent than ever before because we live in a digital world where so much is done online and borrowers & lenders can do business without even meeting each other. Therefore, you should always be vigilant by checking your credit report every month.
If you think someone has applied for credit in your name, you should contact the lenders concerned without delay to let them know that it was not you. You should consider getting in touch with Action Fraud because they automatically contact the UK’s three main credit reference agencies upon receipt of your report to them. Keep an eye on your bank account and on your credit card statements for any transactions which you don’t recognise or which are unusual. You may also wish to think about filing a Protective Registration with CIFAS which lets lenders know that your identity has been spoofed before.
Keep up with your payments
Every month, your bank, building society, credit card companies, and other financial institutions report back to the credit reference agencies letting them know whether you have made your repayments on time. And it’s not just the companies you borrow money from – mobile phone companies, insurers, and utility (gas and electricity) companies do as well.
If you miss a repayment, it can lower your credit score. So you should definitely make sure that you keep making repayments on time and in full to protect your credit score.
Don’t borrow more than you can afford to pay back
Related to that, never take out more money on credit than you can afford to pay back in monthly repayments. If you need £1,000 but take out £1,500, you might feel temporarily “in the money” but that feeling is short-lived. You’ll probably end up spending that extra £500 you don’t need on goods and services you also don’t need but you’ll be paying interest on that £500 until your loan is paid off or your credit card balance is settled.
Credit is there to help you buy things you want and need but it allows you to spread the payments over time. However, if you let it get on top of you and you can’t afford to pay back what you owe, your lender may attempt to take out a County Court Judgement against you or even worse – manoeuvre you into bankruptcy or into an Individual Voluntary Arrangement.
A County Court Judgement, bankruptcy, or an Individual Voluntary Arrangement will stay on your credit file for six years and you will really struggle to get any form of a loan, credit card, or bank overdraft arranged during those six years.
Don’t spend right to the limit
As well as letting credit reference agencies know whether you’re paying them back on time and in full every month, they send other important information to be included on your file too.
Whenever you take out a credit card or an overdraft, there are two important numbers to consider – the “balance” and the “limit”. Your limit is the maximum amount you can spend on a credit card or an overdraft whereas the balance is the amount you’ve actually spent.
On your report, the credit reference agency will add up all of your balances and all of your limits. They want to check out how close your combined balances are to your combined limits. The closer the two are, the more a lender will think that you’re having trouble managing your finances and, depending on the policy of your lender, they may refuse to open a new credit card account or overdraft.
Think about closing accounts you don’t use anymore
One way you can improve this, in theory, is to take out as many credit card or loans as possible with no real intention of using them because this will increase the combined total of your limits. This will make your combined balances smaller proportionately.
However, this does not work out in practice. If you have enormous amounts of credit open to you, it may make a lender believe that you can’t handle any more new credit accounts and that you’re stockpiling your access to credit just in case things turn bad for you financially. You should give serious consideration to closing down credit accounts which you no longer use.
Don’t make too many credit applications at once
Likewise, if you make too many applications for credit in a short space of time, lenders will assume that you’re desperate for as much money as possible and that you haven’t thought through how to pay all this extra credit back.
You should space out your enquiries as much as possible. You may also wish to consider using a broker like Oyster Loan who can make multiple applications on your behalf but only need to order one credit report from the credit reference agencies. If you make multiple applications direct to lenders, they all need, by law, to order your report and each time they download your report, it will be recorded for all other lenders to see.
Make yourself easy to find
Last but not least, one of the best things you can do to protect your credit score is to remain on the electoral roll every year. No matter how good or less than perfect your credit history is, failing to appear on the voters’ roll will severely impair your chances of getting a short term loan or any other type of credit.
Make sure you register to vote, even if you live with your parents or in shared accommodation, by visiting the Register to Vote website.
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