The best ways to improve your chances of being approved for a loan
Is your credit rating in the best possible shape it could be in? A bad credit score can happen to any of us. Our credit score does not remain static, and so depending on our financial circumstances, it can go up and down from year to year.
The reality is that there are borrowers looking for payday loans no credit check, but they do not have to be. Building up your credit score can give you greater access to different loan products and better rates, since you are considered less risk to the lender. We explain some of the best ways to improve your credit rating below.
Credit scores explained
First things first, let’s take a look at what exactly a credit score is, before getting down to how you can improve it. A credit score is based on the financial information on your credit report and is given a score by the three main credit reference agencies, who lenders turn to in order to carry out a credit check on you, so they can assess whether or not to accept your application for a loan. This is why having a good credit score, and taking steps to improving it are vital, as it dictates whether you will be accepted for things such as mortgages, credit cards, short-term loans, and even insurance or mobile phone contracts.
The information on your credit file that dictates your credit rating include:
- Store cards
- Joint accounts you have
- Credit already available to you
- Your credit search footprint (the number of applications you have made for credit whether they were successful or not)
- Any early or late repayments made
Steps to rebuilding your credit rating
A way in which you can rebuild your credit rating is through getting a payday loan, providing that you make repayments promptly and use it wisely. This is because it will show on file that you were able to take out a loan, and then make prompt payments back, which can help to steadily improve your credit rating over time. However, make sure you pay on time as it could lead you into debt.
Credit builder prepaid cards
Another option that can help to improve your credit rating is through credit builder prepaid cards. Perhaps you’ve never had a credit card before and have had no debts, but even this can have a negative effect on your credit rating, as, for lenders, there is no trace on record of your ability to borrow money and then be able to pay it back promptly. This is where credit builder prepaid cards can help (or if you have bad credit due to a history of late repayments) you can use these cards to make small purchases monthly, and then be sure to pay back on time. You will usually not be able to access the money you have put onto the card until it has been repaid in full, but it can significantly improve your rating.
Remove negative financial associations
Unfortunately, something that can impact your credit rating is if you are financially linked to somebody with bad credit, most commonly in the form of a joint bank account or mortgage. This means that your credit rating may be good, and you will still be declined for a loan if your partner has a poor rating. This is why you should seriously consider disassociating yourself financially from someone with bad credit if you want to rebuild your rating.
Pay off existing debts
A top priority of yours if you seriously want to rebuild your credit rating is to look at clearing any outstanding debt you have as soon as possible. This is because lenders will be looking at how well you are currently managing existing debt when assessing your application, so it is always best whenever possible to pay more than the minimum repayment.
Make sure you are on the electoral register
It goes without saying that it is vital that you are on the electoral roll if you want to rebuild your credit rating. It is one of the simplest and quickest ways to improve your credit score, as it provides lenders with proof of both your identity and address history which is one of the most basic things they will be looking at in order to decide whether to approve or decline you for a loan. If you aren’t sure if you are registered (for example, you may have moved address, changed nationality or name, which means that you will need to register to vote again) you can check on the GOV.UK website, if you find out that you aren’t, signing up online is easy to do by filling in this form, and you will most likely need your national insurance number and passport in order to register, taking around 5 minutes to complete.