Posted December 2016 by NZCU Baywide
Get better interest and higher loan approval with these 5 tips
As we have written about previously, your credit score can greatly impact both your ability to get credit, as well as the amount of interest you are likely to pay when you do. Obviously, to manage your credit score, it is important to know your credit score, and understand what it is.
If you’re unsure, your first step is to answer those questions. Our earlier article that we’ve linked to above can help you with that part.
Your credit score, amongst other things, weighs your positive credit history against your negative credit history. Sometimes, things happen and your credit score is negatively impacted, which makes it harder to obtain finance, or leaves you paying more interest than you might otherwise have had to.
The good news is that all is not lost. While your credit score may be with you for life, a bad credit score doesn’t have to be. How so? Because there are ways you can actively work to improve your credit score, and therefore your chances of approval and better interest, among numerous other benefits which we’re about to explore below...
Do you have a bad credit score? Here’s 3 reasons why you’ll want to improve it
By taking a common sense approach to managing your money, loans and debts you’ll ensure you’re ready should the worst happen, and a positive credit score reflects this preparedness. But the rewards of a good credit score are also more tangible than that: it can prove invaluable the next time to you go to apply for a loan or credit.
The benefits of a good credit score includes:
You can negotiate a better deal on your personal credit, as well as personal and debt consolidation loans.
You can seek out the best deal among financial providers.
You can ask if you’re eligible for any bonuses and benefits including greater rewards, lower rates or lower fees.
Sounds pretty good, right? So if you’re struggling, try the following 5 common sense methods for improving your credit score:
1. Pay your bills...on time.
This one seems obvious, but it is absolutely critical. It is not only bank loans and credit cards that will affect your credit score. Your electricity and telephone services are also credit providers, and they will report delinquent accounts to credit bureaus.
Missing your payment deadlines on a few bills is a quick way to put a dent in your credit score, as it will indicate that you are not reliable when it comes to on-time payments, so you need to pay them on time.
2. Dispute errors
Occasionally, things do go wrong and people make mistakes. Unfortunately, if they involve your credit history, these mistakes can affect your credit score and your ability to get a loan. You can access your credit report without affecting your credit score, which you should do anyway: it's difficult to know if you're improving if you don't know your score in the first place.
Checking your credit score doesn’t have to be difficult, either. Using a service like CreditSimple, you can quickly and easily log on and check your credit score online, right now, and completely free of charge.
If you report an error, the company who reported the issue is obligated to investigate it and it can be removed if you are correct. Make sure that you do report any errors you find, and follow up on the investigation process. Don't let issues that you didn't cause hold your creditworthiness back.
3. Keep balances low on credit cards and other revolving debt
When you apply for finance, your potential lender will check how much credit you have available, and how much of your credit limit(s) you have used. If you have credit cards or lines of credit that are maxed out, or close to it, your lender may read that as you being on the financial edge. This will make them much less likely to lend to you, as they will view you as too much of a financial risk.
Can’t I just pay someone to remove information from my credit file?
The short answer? No. While it may seem like a quick solution, don’t be fooled by companies that say they can do this for you. Information contained within your credit report is only removed if it’s proven to be incorrect, or if it’s out of date. As we’ve explored above, disputing errors in your credit report is a good practice to follow, and is entirely free to do.
4. Keep your credit card accounts open
This may seem counter-productive when viewed against the need to keep your balances low, but it is not. Closing down your credit cards will not help to improve your credit score, and may actually harm it. Having your credit card accounts open with little-to-zero balances will show a reliability and safety in handling money that has been lent to you.
In addition, should something go wrong that affects your credit score, cash flow or ability to gain finance, having credit already available will be invaluable.
5. Avoid making multiple credit applications
When you apply for credit, the credit provider will check your credit report. These enquiries are noted on your report, and having multiple enquiries from multiple credit providers can have a detrimental impact on your credit score.
Remember, this does not just mean applying for a loan or a credit card; phone, internet, and utility providers will check your credit score as well. If you make yourself look desperate by triggering numerous enquiries, you may become desperate as your credit score declines, so lenders become less keen to lend to you and your interest rates go up.
You have a plan, now it’s time to take action
One word can sum up the process of improving your credit score: discipline.
If your score is low, it is likely a result of poor discipline, little-to-no credit history, or a combination of the two. The only exception is in the unfortunate circumstance where something outside of your control, like loss of employment, has damaged your credit score. In any case, it will be diligence in knowing your credit score and development of financial discipline that will bring it back, improving your attractiveness as a borrower and lowering the interest you will be asked to pay.
By using the 5 steps we’ve explored above? You'll be well on your way to doing just that.