Reasons to rectify your bad credit rating
A bad credit rating will only effect you when you are looking to secure finance, by way of mortgage approval, loan approval or a mobile phone contract. Your credit rating is compiled by information such as your age, where you live, previous and current debt repayments, any missed or late payments which give creditors an idea of whether you are likely to repay the finance that you borrow.
If you foresee that you may be interested in securing finance by way of loans or credit cards in the future it is a good idea to look at your credit file to ensure that you are aware of your credit rating, and if you do have a bad credit rating look at ways that you can improve it.
If haven’t had any loans or other forms of credit in the past, your credit rating will be bad, this is because there is no record of how reliable you are as a borrower. If you are in this situation, your credit rating will only improve if you do borrow and you repay on time. For many a good option is to take out a credit card with a low borrowing amount and use this to pay for usual purchases each month, such as petrol costs or shopping costs – items that you currently pay for each month and ensure that you clear the credit card balance in full every month.
This method can help your credit rating, meaning that there will be better loan or mortgage deals available to you in the future. It is crucial to make sure that you are controlled with regard to your credit card spending and repay the credit card balance in full every month as not doing so will have the opposite effect and thus defeat the object of creating and maintaining a good credit rating.
When it comes to applying for a loan, this must be taken seriously and the loan should only be used for items that you cannot afford to pay for outright, and you must be earning enough each month to comfortably afford to be able to repay the agreed loan amount. If you do not repay your loan there will be a negative effect on your credit rating.