(Akiit.com) Maintaining a good credit score is important for many different reasons. If your credit rating is fair or above, you are likely to be accepted for financial products, including loans, mortgages, and credit cards. However, you may not get the best rates. If your credit rating is excellent, not only will you be able to secure a wide range of financial products, but you will secure amazing rates in the process. If you currently don’t have a good credit rating for any reason, you may fear that you are going to be stuck in the black books for years and years to come. However, it doesn’t need to be this way. Rather than dwelling on what has passed, you need to focus on moving forward. With that being said, let’s take a look at the steps you need to take to rebuild your credit score.
Download your credit report
The first thing you need to do is download your credit report. This is something you can easily do free of charge nowadays via various websites. Make sure you opt for the likes of Experian or Equifax. These are the credit agencies that tend to be used by all of the major companies and banks. By downloading your free report, you will be able to view your credit score. As per law, you have right to your
statutory credit report free of charge. This gives you an overview of your financial history. It is worth downloading this so that you are up-to-date. However, companies like Experian and Equifax will actually give you a credit score. You can get this free for one month. Some companies provide you with a free report consistently, yet it is only a basic snapshot and you need to pay a monthly fee for a more comprehensive view. With Experian, you will receive a score out of 999. The scores are as follows:
- Excellent: 961 – 999
- Good: 881 – 960
- Fair: 721 – 880
- Poor: 561 – 720
- Very Poor: 0 – 561
Equifax works on a similar scale, albeit the scoring is out of 600. A lot of financial institutions and companies will use both credit agencies when determining whether to lend to someone or not.
Figure out what is having a negative impact on your credit score
There are many different reasons why you may have a poor credit rating. If you have missed numerous payments or you have defaulted on a loan, the reason for this may be evident. However, if this is not the case, you may be wondering where you have gone wrong. There are a number of different reasons why you may have a bad credit rating. This includes the following:
- The average age of your credit accounts is low.
- Your highest credit limit on a single revolving account is low.
- You are using a large number of non-mortgage credit accounts.
- You have made credit applications in the last six months.
- Your total non-mortgage balance is high.
- You have opened credit accounts in the past six months.
- You are using a high amount of the credit that is available to you, indicating that you are a high risk.
Set up a budget
The next thing you need to do is set up a budget. You need to know exactly how much money you have coming in and going out every month. This budget does not need to be complicated, you can easily do it online with Google Spreadsheets, but it does need to include each and every expense, no matter how insignificant it is. This will leave you with the amount of money you have left over every month. Once you have attributed a realistic amount to your monthly living costs, you will then know exactly how much money you have left to pay off your debts every month. You will then see when you will be able to be debt-free.
So, how do you go about paying off your debts? Most people will agree that the best thing to do is pay off the biggest / most expensive debt first. Of course, you still need to make the minimum payments on a monthly basis. However, by tackling the card with the biggest interest rate first, you will ensure you pay the lowest amount back overall.
Assess your current accounts
The final thing you need to do is assess your current accounts. Is there anything you could do to give your rating a boost? For example, you may want to enquire about increasing your credit limit. If you do this, this can increase your rating. Firstly, it will show that you are less of a risk because one lender is willing to offer you more money on your card. Secondly, you will be using less of your available credit because you now have more money available. You should also look at the best credit card offers for no credit. If you can get a balance transfer deal, you could move one of your balances to this card and you won’t pay any interest for a number of months or even years.
Hopefully, you now feel more prepared to rebuild your credit rating. As you can see, there is a lot that needs to be considered when it comes to your credit score. Boosting your rating is not going to be easy and it will require a lot of effort on your behalf, but it will certainly be worth it in the end. After all, once you achieve financial freedom and improve your credit rating, you will find it much easier to reach other milestones in your life, such as purchasing a property.
Staff Writer; Gary Ross