Tag Archives: history
10 top tips to improve your credit score
We’ve gathered together a list of the top ten things you should do to improve your credit score. These apply to people in the UK, but the principles will be very similar to any country with central credit reference agencies.
1. Get a copy of your credit record – You’ll need your last 3 years of addresses including post code’s to hand. You can get them for a statutory fee of £2. from Experian or Equifax. Don’t be conned by the “free” offer which gets you to subscribe to a monthly fee service unless you really want to.
2. Register on voter’s role – This helps verify your address and that you are who you say you are.
3. Take out credit – If you proove you can manage credit and have some credit history, then you are more trustworthy. The last 6 months payment history on all products at a credit reference agency are often used to assess ability to manage credit. If you don’t have payment history you will be classified as a “thin credit file” and either charged a higher price or refused credit.
4. Open a current/checking account with the bank – This allows you to proove your income more easily as they can see it paid into the account and they also know where to find you if you can’t pay it back. This is a good option for those new to credit.
5. Pay on time – Paying late is used as a sign that you may be in financial trouble. In the industry it is called “one down”. If it happens only once, you are usually ok providing you pay on time every time after. Paying over a month late (“two down”) means you have a much stronger chance of being bad credit. Avoid these problems by setting up a direct debit or recurring payment on a date soon after your salary enters your current account.
6. Don’t go over your credit limit – This is used again as a sign that you may be in financial trouble and is built explicitly into credit scorecards.
7. Close down lines of credit you aren’t using – Banks can see the total credit line available to you from all other banks. If you already have plenty of credit line, they may give you a smaller one or refuse credit when you try to get more. This is an attempt to stop “bust out” where a person maxes out everything at once.
8. Don’t max out the line available to you – This almost contradicts the point above, but customers that have high usage (“utilisation”) of their credit line are also likely to be bad credit.
9. Serve a notice of disassociation if needed – Credit agencies will financially link people with the same surname at the same address so if you live in a rented flat that has had someone with the same surname there or you live with adult family members that you aren’t married to, you may wish to serve a notice. There is advice on this on the experian and equifax websites.
10. In financial difficulty? – If you are having difficulty meeting your payments, firstly use our budget calculator to understand your incomings and outgoings and see if you can make cutbacks or boost income somehow, then read the Bad Credit page where you can consider your options.
Secured Loans and Unsecured Loans- What's the Difference?
Whether you’re new to the world of financing or you’ve done this a number of times before there’s always more to know about your options and what is out there so you can decide what will work best for you and your circumstances. One of the first basic decisions you have to make is whether you want to apply for secured loans or unsecured loans, so, what’s the difference? This article goes over where these options differ so that you can decide what is important for you and your financial situation.
Unsecured loans are based on your financial background, focusing on your income, and your credit history. This is all they have to look at and base their decision to lend to you on. When a lender looks at your credit history they are trying to decide how much of a risk you representthe risk being that you won’t make your monthly payments on time. When you have a lot of late and missed payments in your financial history this tells them that you are likely to not pay on time. When you are considered a high risk applicant they are less likely to approve your application at all, and when they do, the worse your credit is worse the higher the interest rate they offer you will be. Another key difference when compared to secured financing is that they are much faster to get approval for because there is no evaluation process. All they have to look at is your history and your income, which won’t take them long to judge.
Secured loans are also based on your financial background, like your income and your credit history, but use collateral in addition. The collateral takes the pressure off of your financial history, but that history does still matter. The collateral will be taken if you fail to make your payments. Because there is a way for the lender to recover their money they will be much more likely to approve your application with an iffy credit history, and are going to offer you a better interest rate than they would otherwise. It does take a bit more time however because whatever you are using for collateral has to be appraised to determine it’s worth.
So what option works best for you? This depends on what your needs are exactly. Everyone wants the best interest rate they can get! But is approval time important, and what is your financial history like? These are questions you should ask yourself before determining what is the right path for you when you’re looking at secured loans and unsecured loans.