How to Elevate Your Credit Rating



When it comes to securing the best deal, a lender always requires you to have a good credit standing. Your credit score must be at least 721 (a fair credit rating according to Experian, a credit reference agency in the UK). This can help you get a loan with lower interest rates, but best deals can turn you down. Even though getting loans for bad credit without guarantor and no broker from has been as easy as falling off a log, you cannot deny the importance of good credit rating.

An impaired credit standing means you will end up getting a loan with high interest rate. You are more likely to have difficulty paying off them in lump sum. Further, you may fail to secure a long-term loans and mortgages. As the score goes up, the chances of getting best deals will be higher. Here is how you should improve your credit score:

Check your credit report

Your credit score is calculated from information mentioned in your credit report. It reveals payment history, credit utilisation ratio, the length of credits, types of credits and number of inquiries. The lender may have your credit report from three credit reference agencies – Experian, Equifax and TransUnion. It is important that you peruse your credit report at least once a year to make sure that everything stated in the report is correct and up-to-date. This will also help you know which area needs to be improved. Look for the errors related to your name and address. Be certain that it does not consist of any default that you do not recognise. If you find any error, you should immediately dispute it with the credit reference agency.

Start building your payment history

If you have very little and no credit history, lenders are likely to charge high interest rates. To avail best deals, you will have to show that you are a reliable borrower. The best approach is to take out an instalment loan. The repayment period of these loans may vary from three to 12 months depending the size of your loan. Since you are to pay off the debt in equal instalments, you could manage them easily. Payment over a certain period shows the lender that you have financial commitment. If you do not miss any of the repayment, it will boost your credit score.

However, building a good payment history is not only recommended for those who have a little or no credit history. Payment history makes up 35% of your credit score. It is important that you pay off all of your debts on time. Try to pay all utility bills and credit card bills on time. Try to avoid maxing out your credit card. The lower the credit utilisation ratio, the better it is. do not make a purchase with your credit card that does not fall in the grace period.

Keep the credit utilisation ratio low

Credit utilisation ratio is the ratio of credit used to credit available. If you have consumed most of the credit available, the lender will interpret that you rely on debt for your regular expenses and hence you are more likely to commit a default. The rule of thumb says that the credit utilisation ratio should not exceed 30%. Otherwise, the lender will provide you with a loan with a higher debt. Make sure that you pay off your credit card debt before the statement closes. According to credit card companies, they report about your payments and defaults to credit reference agencies when the statement is closed. Avoid the use of credit card as much as possible if you face difficulty managing your debt. Try to use only 10% of your each card if you own multiple cards. This might be difficult, but the utilisation ratio is the second most important component to calculate your credit score.

Do not close unused cards

Do not forget that the credit utilisation ratio can be higher even if the available credit balance is very low. There are two aspects: the balance you owed and the balance available. Make sure that the card balance should be as high as possible. Experts suggest that you should avoid closing your credit card even if you do not need it. Otherwise, it will shrink the available line of credit and as a result, your utilisation ration will go up. Therefore, consider both the aspects.

The bottom line

Loans for bad credit without guarantor can be accessed easily, but at the same time, you have to bear in mind that you need to improve your credit score. Focus on building your payment history. Take out instalment loans if you have no credit history. Keep credit utilisation ration low and do not close unused credit cards. Pay your utility bills on time. Remember that it will take a bit long time. You need to be patient.

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