Your credit history is very important, it determines what loans you will qualify for and what type of interest rate you will pay. Bank lenders are able to obtain your credit history by getting hold of your credit score.
What is a credit score?
So what is a credit score you ask? A credit score gives lenders the chance to look at your spending history and distinguish whether or not you are suitable for a loan. It gives lenders an indication of how your spending habits are and how likely you are to meet your loan repayments. So the concept is easy really, the better your history, the more attractive you become to loan companies.
What guidelines does the industry follow?
- The better your credit score the better rates you will get on a loan.
- If you have a low score this does not automatically disqualify you.
- As your credit information changes, your score changes.
Do I need perfect credit?
You need to remember that lenders are not looking for customers with perfect credit, it is not something they expect. If you have reached a point in your life where you feel like you’re ready to take the next step for example buying a home instead of renting then there are options aimed specifically at first-time homebuyers.
How can I improve my credit?
There are a number of ways to improve your credit score, one is through credit counselling or money management companies. These are non-profit companies that are aimed to help those who have problems managing their income.
So, how can you figure out if credit counselling is suitable for you? Credit counselling is fundamentally learning about the steps you should be taking in order to guide us through the difficult times in our financial lives.
Credit counsellors often work with both you and the lender to come to some sort of resolution. Most lenders are happy to do this as they receive back their owed money in a suitableway.
Here are the main steps to take if you wish to improve your credit score:
- Cut back on unnecessary expenses and save the money you would have otherwise spent.
- Use saved money to pay your debt off.
- Pay off and close credit card accounts whenever you get the chance to.
By paying off your debt, your credit score will improve within a few months. You should keep certain goals in mind and constantly monitor your credit situation and you’ll be well on your way to improving your credit score.
Sam is a content executive for PPI Refund, she is a dog loving, baking fanatic and horror film nerd with a passion for sharing her suggestions and tips with a wider audience.