Why Does Bad Credit Matter? And What Can You Do About It?

One of the biggest problems with a bad credit rating is the fact that it can seriously curtail your borrowing options. Most people would like to be able to borrow money for, say, a car or a house. But with a bad credit rating, you’re unlikely going to be able to do either, unless you want to pay enormous rates of interest.

Often a bad credit score is caused by things like defaulted payments, bankruptcy order or phone bills you’ve paid off late. What’s more, companies won’t go out of their way to share your credit report with you. Instead, most people only usually find out that they have a bad credit score when they try to apply for a mobile phone contract or a credit card and get turned down.

So how can you improve your score?

Check Your Credit Report

Image and video hosting by TinyPic

Flickr

It turns out that there’s a lot that the average person can do to improve their ratings. One thing is to make sure that your credit report is actually correct and that all of your debts are filed under your correct name and address. Often credit rating companies get details wrong, and in the process they adversely affect your credit score, sometimes blacklisting you when you haven’t done anything wrong. Ask to see your credit report and make sure that all the information on the report is valid. Hard inquiries can impact your credit

Apply For One Product At A Time

Image and video hosting by TinyPic

Flickr

Next, make sure that you don’t make a bunch of credit applications all at once. Credit rating companies are very sophisticated in their approach, and they know that if customers are making lots of applications, it probably means that they think that they don’t have much of a chance of being approved. Therefore, if you want to improve your credit score, it’s a good idea to apply for one product at a time and not immediately try to apply for another if you get rejected.

Use A Credit Repair Company

Credit repair companies are companies that specialize in improving your standing with rating agencies, helping you to secure loans in the future. Many of these companies will charge you money, so it’s a good idea to make sure that you choose a good one. Click here for more details on which companies are good, and which are not so good.

Prove You’re A Responsible Borrower

Another big way you can show that you’re a responsible borrower is to prove it by taking out a high-interest credit card. Paying off the balance on the card every month will demonstrate to lenders that you are able to manage your finances and pay off loans when required. Spend small amounts and then continue clearing the balance, avoiding any actual interest payments in the process.

Set Up Direct Debits

Image and video hosting by TinyPic

Flickr

Finally, it’s a good idea to make sure that you pay all previously agreed upon payments. Missing things like phone bills and utility bills can have an adverse effect on your credit score. If you struggle to remember to pay, set up direct debits.