Settle The Score: 7 Ways To Beat Bad Credit

paper showing credit score and three ratings: excellent, good and fair. With Excellent being highlighted

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Many of us don’t pay much attention to our credit score until it’s too late. Your credit score is determined by how well you borrow and pay back money and helps you to make big purchases, to take out loans and start up direct debits that could include anything from a phone contract to an insurance scheme. Those that constantly dip into debt and are unable to pay the money back on time damage their credit score. You can’t shake this score off – it will follow you around forever. However, you can take actions to improve your score, such as removing late payments from your credit report. If you’ve currently found yourself in a bad credit slump, here are a few ways that you restore health to your score.

1. Start paying on time

Pretty obvious, I know – but the overspending has to be put to bed. Every time you enter your overdraft or a payment bounces, you’re only reducing your credit score further.

Keep a more detailed record of your spendings by getting a calendar or diary and recording any dates when big bills or loans may be going out so that you can budget accordingly. If you can, create a budget for every week. This will give you more control over your money and give you a clearer idea of when you’re about to enter the red zone.

Feel free to still use a credit card or borrow money, but make sure you stick to your record so that you pay back these loans on time. Eventually, the banks will start to see that you are able to borrow and pay back punctually and they will start reducing your credit score.

2. Use a credit-builder prepaid card

One way to repair your credit rating quickly is to use a credit-building prepaid card. This involves loading a set amount of money onto a card. Every month you must pay a fee to the card company. After a year of making successful regular payments, the card company will notify potential lenders and special providers giving them a glowing report of your ability to handle your finances that will dramatically reduce your credit rating. Whilst this is a great method, it only works if you keep on top of payments for this prepaid card, otherwise you may as well be taking out a loan for no reason. It’s best suited to those in real credit score trouble who need a quick repair method.

3. Seek specialist loans

Trying to take out loans with a bad credit rating can lead to a vicious downward spiral. The more loan companies that reject you, the worse your credit score will become.

Fortunately, there are other options. Instead of choosing any old loan, you can uses specialist loan companies for bad credit scores. Such companies can even point you in the right direction when it comes to dealerships and estate agents, notifying you of ones that won’t reject you based on a bad credit score.

4. Consider an insurance broker

Bad credit can also affect your ability to take out insurance schemes. These could include important mandatory schemes such as car insurance or employer liability insurance. Even if you aren’t rejected, some companies may charge higher premiums as a result. A solution to this could be to take out an insurance broker. Not only will a broker be able to find the best insurance deals, many will also know the companies that are likely to reject you – avoiding these and keeping your credit score intact. For business owners with multiple insurance schemes may benefit to look into this, if only to save the headache of having to shop around and monitor their insurance schemes themselves.

5. Check that you’re on the electoral register

Many lenders will use the electoral register to find your name and address when checking your credit score. Not being on the register, even if you don’t plan to vote, could be a reason why you are being rejected often. By not being registered, it encourages lenders to think that you’re trying to conceal your identity (and that you may be a fraudster). Registering is easy and could be the simple solution to your problems – simply contact your local council to get registered.

6. Cancel unused cards

A credit card that you’ve had for years but never used could be affecting your credit score. The card may still be registered to a different address, which is a red flag to many lenders who again might think you’re a fraudster. You can simply change the address of the card, but if you have no future plans to use it, you might as well cancel it to save the burden of changing its details every time you move address.

Those with unused cards that were once used should meanwhile also do the same. Not only can it repair your credit score, it may open you up to better credit card offers after a year or two, as credit card companies will try to entice you back with more rewarding deals.

7. Put a stop to partners or flatmates wrecking your score

If your partner or flatmate has a bad credit score and has asked you to take out a loan for them, be wary of being overgenerous. You may take out a loan you can’t afford, hoping that your partner or flatmate will pay you on time each month in exchange, but if they miss a payment, then you miss a payment, and then your credit score suffers as a result. Only take loans out for other people of whom you can trust will pay you on time. If you can avoid it, try not to take out loans for other people at all. Teach them some of the methods discussed in this post so that they can repair their credit rating themselves, or lend them the money and effectively be a loan company for them. Be firm and don’t let someone else selfishly sabotage your good credit rating.    

Conclusion – Where to From Here

After you implement the steps above, you’d be well on your way to repairing your credit. Even if you hire a credit repair company and repair your credit score fast, you’re not out of the woods yet. You have to address the underlying issues that go you into bad debt and credit in the first place.

Maintaining a good credit score is outside the scope of this article, but you can start by keeping up to date with your payments. You can also utilize less credit and apply for fewer new lines of credit.

I hope that you found this article useful, and hope to hear of how your credit repair journey is coming along!