When we talk about your ‘credit rating’, we’re talking about your entire history of financial decisions.
That might sound scary, but it doesn’t have to be.
See, every time you apply for a loan, a mobile or internet plan, mortgage or credit card, for example, the provider has to check whether or not your history demonstrates you will be able to afford the payments.
Every time you apply for a financial product or service, the details of that application enter your credit report.
Your credit rating is the sum total of your applications and the rate of success or failure you have had in both obtaining and repaying loans.
This means that every time you apply for finance, you’re not really going up against some big bad company who doesn’t want to lend you money.
Really, you’re going up against your own financial past.
If your credit rating reflects a long history of successful applications and diligent repayments, you’ll generally stand a higher chance of succeeding with new applications.
But, if you have a long history of missing payments or being chased by debt collectors, for example, chances are you’ll find it more difficult.
Simple Ways To Protect & Improve Your Credit Rating
If you already have a good credit rating and you want to keep it that way, here’s three things to keep in mind.
Keep on top of all your accounts: Whether it’s your mobile phone, your Sky account, broadband connection or home utilities accounts, make sure you stay up to date with payments.
This shows the credit rating agencies that you can be relied on to meet your payment obligations.
Minimize your debt: OK, we know sometimes you have to borrow to improve or stabilize your financial position.
But think carefully before you borrow.
The more debt you have to your name, the riskier you might seem to potential future lenders, because this debt will show up in your credit rating.
Show stable income and living arrangements: The longer you’ve been earning income from a job, and the longer you’ve owned or rented your home, the more likely your credit rating will demonstrate stability and reliability — two things which finance companies like to see when assessing a loan application.
Common Pitfalls That Can Damage Your Rating And Make It More Difficult To Get A Loan
At Loanplace, we see a LOT of finance applications. Time and time again, we see people making the same mistakes and costing themselves the chance to secure a loan at a good interest rate.
Here’s three things to avoid if you’re looking to build a good credit rating:
Applying for heaps of loans: This is important. You don’t have to obtain a loan for your credit rating to change, you only need apply.
There’s no sense applying for 10 loans in a single day when each company you apply for can see you’re applying to the nine others.
The better option is to do your research and apply for one loan, not many.
Accepting payday loans: These high interest, short-term loans are sometimes necessary for those trying to alleviate urgent financial problems.
But the reality is that accepting a high interest loan like this demonstrates to credit rating agencies that you may be in financial hardship — making it tougher to get accepted next time you need finance.
Gambling before applying for finance: Successful loan applications require proving your income and financial behavior via bank statements.
Lenders will look for evidence of gambling.
This can negatively impact your chances of getting approved, because lenders ideally want to give you finance to improve your financial situation, not make it worse.
To learn more about your credit rating and discover how much you might be able to borrow, get in touch with us today for a free, no-obligation consultation.