It’s the worst feeling in the world. You sit there, sweating, heart racing, feeling all kinds of guilty. There’s an intake of breath. The tension in the room is a physical presence. The salesperson looks at you pityingly. “I’m sorry,” they say “you’ve been declined for credit.”
If you’ve been in a situation where this has happened, you know the dreadful sinking feeling, and the grave implications of not being able to access credit when you need it, whether it’s an emergency loan for that urgent repair, finding a home or purchasing a car to get to a job. If you have bad credit, it can be the monster under the bed. Thankfully, there are some steps that you can take to repair your credit rating and get free.
Understand your Score
Begin by making a check on your file and finding out your credit score. Your file will contain details of all your lines of available credit, such as store cards, loans, credit cards, car finance and mortgages along with a record of your repayments and other details. The product that you’re applying for will only accept you if your score meets or surpasses the level set by the lender. If it comes under that threshold, you will get declined – and the bad news is that the more declines you get, the worse your score becomes. It’s a balancing act – applying for too many things without knowing if you’re likely to get accepted risks severely damaging your score. But paradoxically, never having had any credit can go against you too – as you have no history to enable a prospective lender to decide on whether or not you’re likely to pay a loan back.
Your financial associates are also listed – this is anyone you share a joint financial arrangement with or have lived with in the past. Their scores could potentially affect yours, but you can apply to have the association removed if it shouldn’t be there.
The score that you have will change over time to mirror your evolving circumstances and payment history – so if you have paid off some credit successfully or missed some repayments, your score will go up or down accordingly, although it can take several months for these changes to show up. So you should make checking your score a regular event to be aware of these changes – this can also help to protect you against identity fraud, as you have a chance to spot any applications made in your name that you aren’t aware of.
Close Unused Accounts
One of the factors lenders base a decision on is how much credit you already have available to you. So if you spot any old, unused accounts then contact the provider and ask them to formally close the account – just cutting up the card won’t work. Prepare for them to throw offers at you to try and keep the account open, but stay firm as too many lines of credit will mean a rejection from other suppliers.
Budget to Exceed Repayments
Use automated banking to make sure that your payments for any loans and credit cards are always made on time, but try to pay off a little more than the minimum amount each month. Even a few dollars will help as it signifies to borrowers your intention to pay the balance off and demonstrates that you can afford the repayments.
Build Up Your Rating
Even if things are dire, you can build up your rating. Go through a website like ReallyBadCreditOffers.com and pick a loan specifically targeted to help those with a poor credit rating. The Annual Percentage Rating, or APR, which is the rate of interest you pay will be high, so make sure you have budgeted enough for it, even if that means learning how to budget better so that you can afford the repayments and more. When the loan is completely paid off, your rating will go up, meaning that the next time you need credit, you should be able to access better deals with lower rates.
Time Your Applications – and Make Them Consistent
We already know that when we’re in a panic and needing credit, it’s easy to get into a spiral of application and rejections. And we know that the more rejection applications, the bigger the negative impact on your score. So be smart and plan well in advance. Use an eligibility checker tool yourself to see what you are likely to be accepted for before approaching a lender, and leave yourself enough time that if you do get rejected, you don’t need to apply for something else straight away. Another thing to beware of is being consistent with the personal details that you use on an application. Anti-fraud agencies can flag you up if you’re making applications to different lenders with different details – so pick one mobile number and job title format and stick to it across everything.
Avoid Credit Card Cash Withdrawals
Rightly or wrongly, these are seen as evidence of bad money management and can count against you – some mortgage lenders even openly state they would reject applicants for this reason. It comes in the same bracket as missing repayments – a massive no-no. Your credit score also dictates the rate you are offered if a lender does decide to take you on. The attractive APRs you see advertised are usually ‘representative’ meaning that they only legally have to be offered to a percentage of customers, not everyone. If you have a patchy history, it’s highly unlikely that you’ll be able to access these deals so that borrowing will cost you more than someone with a good rating.
You Aren’t Their Type
Even people with great credit history sometimes get rejected. That’s because lenders may be looking for someone with a particular profile – for example, a home-owner to cross-sell a mortgage product do. Sometimes you just can’t know what the criteria really are. Again, using an online eligibility checker can help to mitigate the risk.
A few simple steps can make all the difference to your prospects of getting accepted. Good luck!