Rebuilding your Credit Score

March 6, 2018 4:37 pm Published by Debt Free Life

It stands to reason that many visitors to this site will be struggling with debt. This means that many of you will likely be struggling with your credit score. Missed repayments, multiple outstanding balances on credit cards, being in council tax arrears – all of these things can compromise your credit score.

You may even have had, or are considering, a debt solution that involves insolvency. This could be a Trust Deed, an IVA, even bankruptcy – all of these will affect your credit rating. However, they only stay on your record for a set period; afterwards, your rating is reset. From here, you will need to improve it.

The question remains, then, how do you rebuild your credit score?

Here are some techniques to help get you back on-track and open up new opportunities to get credit.

1. Get a credit card.
It sounds fairly counter-intuitive, applying for a credit card to rebuild your credit score, but using a card responsibly can do wonders for your credit score.

If you apply for a card, use it semi-regularly, and pay it off straight away, your score will begin to gradually improve. You aren’t using it to get access to money you don’t have, you should treat it almost like a debit card. Only spend what you can afford to pay back as soon as the bill comes in – nothing more.

Cards with a high interest rate will improve it faster, although this can be dangerous as your balance may increase quickly if you miss a payment.

2. Make sure your bills are paid on time.
Meeting financial commitments as simple as your mobile contract, internet and utilities can improve your score. It shows you are reliable and on aware of when these bills are going to be charged.

Set up a direct debit, or mobile phone reminders, or even use a calendar to make sure you don’t forget.

3. Register to vote.
It sounds a bit odd, but being on the electoral poll can improve your credit score. If you aren’t on it, getting credit can prove to be quite difficult.

4. Try to stay at the same address
Lenders can be a little hesitant to lend to someone who has had multiple addresses in a short period of time. Try and limit the number of times you change your address to a minimum to help ensure lender confidence.

5. Get rid of your debt as soon as possible.
Owing large amounts of money to creditors can make it nigh on impossible to get further credit. Owing thousands of pounds in unsecured debt makes lenders unlikely to lend you anymore, as you don’t appear to be reliable and they cannot be sure they will see their money again.

Getting rid of your outstanding debt is of the utmost importance in terms of increasing your credit rating. Something like a Debt Arrangement Scheme or Debt Management Plan can give you some breathing space to get on top of things, and don’t require you to declare insolvency, preserving your credit rating.

On the other hand, a Trust Deed or IVA can allow you to write off up to 80% of your debt, and make repayments much more affordable, yet this requires you to become insolvent. Entering one of these agreements will stay on your record for a set period of time, making it difficult to get credit.

However, if you are in a position whereby a debt solution like this is appropriate, it is likely your credit rating already is in bad shape. These can offer a way to reset your score, allowing you to build on it using the other tips in this guide. It is often painted as a downside to a Trust Deed or IVA, but in many ways, it is a genuine opportunity.

If you are having trouble with debt and find that it is difficult to get any more credit, then it is time to take action. At debt free life we have helped thousands of Britons across the country take back control from creditors and get rid of financial anxiety. Call our team now on 0800 808 5124 – there are 25 friendly advisers ready to help you take the next step and offer guidance and support that is personal to you.

Alternatively, take a couple of minutes to fill out our debt calculator, and we’ll be in touch very soon.

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