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What You Can Do If You Think You Have A Bad Credit
Last Updated on: November 7th, 2024
Your credit score is one of the most important parts of your finances ? it reflects how well you manage money and is a key factor when it comes to being approved for loans and various other forms of credit throughout your life.
If you fail to pay your bills on time, your credit score can deplete, and it can be more difficult for you to get the help you need in the future.
If you are struggling to pay your bills due to an unexpected expense, payday loans could be an option for you ? with bad credit applications considered, you can benefit from funds to use in an emergency.
What Is Bad Credit?
When we use the term bad credit, we are usually referring to an individual?s credit score. Your credit score shows lenders how trustworthy you are when it comes to paying back a loan.
A low credit score will often reflect a person?s financial situation and inability to pay bills on time. With a low credit score, it is more difficult to be approved for loans in the future, like loans for a financial crisis, mortgages, car finance, or any other loan they may need to apply for in the future.
If you have checked your credit score, and it is less than 580, this could indicate that your credit score is low, and may put you on the back foot should you need financial assistance. But all is not lost ? there are ways that you can improve your credit score for good. We will look at a few of these factors in more detail below.
How Can You Improve?
If you?re worried about your credit score holding you back from achieving your goals, you can make a few simple changes to your lifestyle and your finances so that you can work your way back to a better place financially.
1. Build credit history
If you have bad credit, this may be because you don?t have enough of a credit history to show that you can pay bills on time ? lenders will not have a clear idea of how trustworthy you are.
This can also impact other areas of your life too such as if you?re looking to rent a property ? some landlords will perform credit checks to check on potential tenants. You may also struggle to get a mobile phone contract or qualify for car finance.
You can build up your credit history, and therefore your credit score by opening a bank account or applying for a credit card. Using your credit card for small purchases that you can then pay off each month is a great way of developing and increasing your credit score ? all you must do is ensure you can manage your bills.
2. Make repayments on time
If you have a low credit score, this could be because you have not been paying any outstanding bills on time. To rectify this, you should automate your repayments at the end of each month, so that you won?t forget about them.
You should also make sure you?re prioritizing loan repayments so that you can improve your score by paying the loan off. Having well-organized finances that you?re taking the steps to manage more closely, means that you can improve your credit score for the future.
3. Check for errors
Take the time to review your credit report and check for any errors. A mistake as small as a misspelled name or address can harm your credit score, so you must rectify any incorrect information. You can do this by getting in contact with the provider you?ve used directly so that you can ask them to change it.
If you spot negative information about your finances that you know is incorrect, you can dispute this, and you never know, you might just be able to give your credit score the boost it needs!
4. Lower credit utilisation
If you use a credit card frequently, you will be aware of the credit limit that is set. If your credit limit is high at around £3000 for example, and you are very close to hitting that limit, this means lenders are more likely to see you in a negative light, as it shows you are spending a lot of money that you don?t have.
Lowering your credit utilization can help with this and bringing down your spending to around 30% of your limit will result in an improved credit score and will be viewed more positively by lenders.
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