When you are applying for a loan, the provider will usually check your credit portfolio, which enables them to see any loans you have had previously and your history of paying back that money.
It also includes information regarding any court and public records and a list of your financial associates. This is to ensure that you will pay back the loan on time and that the provider will not be handing out money that they will never see returned.
These checks can be performed in regards to any type of loan, from an overdraft to a mortgage. The information contained in this portfolio is summed up with a number: your credit rating.
If your credit rating is bad from having not paid back loans or irregularly paying back loans, you could be rejected from borrowing more money.
Having a partner who has bad credit rating can also affect yours, preventing you from borrowing money. Equally, if you have no credit rating at all, having never borrowed money. Many providers will decline your application. This is due to you having no history to prove that you will return the borrowed money.
In these cases, it is important to gain a better credit rating. This can be done through a series of steps to evidence your ability and responsibility in paying back the loan.
1. Separate from your spouse
If you spouse has a bad credit rating, it will dramatically affect yours. If you and your spouse are no longer together, it is very important to divulge this information to credit reference agencies.
However, it is not enough just to be separated. Any financial products that you hold together, such as joint bank accounts, need to be closed so that you distance yourself from their financial problems. If you are still together, legally separating may lead to a more successful loan application.
2. Close your accounts
While back in the day, you could cut up your credit cards, now you need to close the accounts. If you have any unused accounts, these will work negatively against your for credit scores. You need to call the provider of those credit or stores cards and ask to have the account closed. This process is usually arduous, as they do not want you to leave, so make sure to be persistent.
3. Pay more than the minimum
When you pay the minimum on a debt, it does not get any smaller. Instead, you are just paying off the interest. This shows to loan companies that you cannot pay off the lump sum you will initially borrow. Try to pay a little off the lump sum each time, even if it is only £5. By paying a little extra off, you are showing to the creditors that you are trying to pay the money back and will continue to pay the interest as well.
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Credit Management reference:
- Carolyn Warren
- Publisher: Bookmark Publishing
- Edition no. 2 (02/15/2016)
- Brian Diez
- HowtoFixMyCredit.com
- Kindle Edition
- Anthony Davenport
- Publisher: Houghton Mifflin Harcourt
- Hardcover: 224 pages
Last update on 2020-03-19 / Affiliate links / Images from Amazon Product Advertising API
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