Whether you are making moves to improve your credit rating, are just starting out and don’t know where to begin or are trying to get back on track with it all, there is one common theme: adjustments will have to be made.
When we think about our finances in relation to our lifestyle, we tend to live in the present rather than compare the past with what could potentially happen in the future. This is the most realistic way to look at it, a sort of “live for today” approach, which is fine in theory – as in, if you are only living for the one day. Unfortunately it’s not what happens for the majority of us, and as such we need to make provisions and plans for the future to be our backup should things go wrong or give us grounding for things to go right.
What is a credit rating?
Your credit rating score is something that companies and businesses use to assess you and estimate how reliable you are to fulfill any financial contract that they may have with you. It can be used from anything from car finance to mortgages, and even help with them deciding whether to give you something as simple as a store credit card. It is all based on previous dealings that you have had; if these dealings have gone wrong in any way, i.e. you haven’t been able to keep up your monthly repayments or bailed out of the agreement altogether, your score will go down and you are less likely to be considered for any future financial deals. This can also happen if you haven’t had any dealings in the past, as companies don’t have much to base their workings on. If you have paid on time (not before schedule – this can affect your credit rating too, but we’ll move on to that later), and kept to the wording of the contract that you have signed, your credit score will rise. Even a good credit score can mean that you are not considered for the very best deals; you have to be in the top percent and ranking as excellent to be eligible for benefits that most others can only dream of.
What can I do to boost it?
There are, of course, the more simple and reliable methods of boosting your credit score – such as paying on time, paying the correct amount, not asking for an extension to your contract and making sure that you are taking on something that you can afford for the long-term. Every piece of finance that you take out will affect your credit score. If you get a credit card and spend a little each month that you know you can easily pay back, this is a great way to improve your score without even having to think much about it. There is also such a thing as credit repair, in which the company will act as the middle-man between you and any organisations that you may be having financial disputes with, which if left unresolved could massively affect your credit score. Have a look online for the best credit repair companies that you can find to deal with you situation. You will have to spend money to get the help, but it will be worth it in the long-run, especially if you are trying to plan your future and any financial commitments that may be cropping up in it, such as house-buying and business loans. Early repayment on lendings like mortgages can incur fines and affect your credit rating, so even if you’ve tried to be good with what you’re doing, you need to be careful as to how it could tarnish your score later. Early repayment means less money in APR for these companies, so they’re losing out by you being good with your cash; it’s a complicated situation, but just be aware of all the things that you could be doing without realising the consequences that they may bring upon your rating.
How will it affect me?
If you’re not able to get credit on what you may consider necessities for your home, lifestyle or business, you will have to pay upfront and in full. You won’t be granted any financial help through a staggered monthly repayment plan or a loan if your score is really bad, although there are certain companies, as previously mentioned, that can try and recover this for you. It is a lengthy process and one that takes a lot of time and careful decisions to get completely right; if you are young and not thinking especially about what the implications of reckless or ill-advised spending (i.e. racking up credit cards and getting everything on finance) could be, then you will possibly be in for a shock when you are trying to settle your life down and forge your own path. It can be especially damning for those who are wanting to branch out of the workplace and start up on their own; if you haven’t got the means to fund your business, then you will need to look for a business loan if nobody else is willing to help. The lenders will instantly look at your credit score in order to determine whether you are essentially a safe enough bet for them. If you’re not, then your application will be rejected. It is as simple as that, and is getting easier for companies to do with the sharing of personal information between companies online. A decision can be reached in seconds. You can check your credit score online before applying for anything to ready yourself for what to expect; there are sites which will want you to pay for this service, but there are trusted agencies like Experian and Equifax which will be able to give you a thorough history of your spending in line with government laws and recommendations, and vet you fully before giving off a report which will determine what you need to be doing with your future.