Applying for a mortgage, personal loan or even some credit cards can take a while. Searching for a lender that has the best value product in terms of payable interest is a potentially lengthy process, while completing an application often takes up even more time. However, the most time-consuming part of applying for credit is the wait to see if your credit rating is good enough.
Everyone over the age of 16 with at least minimal financial responsibilities has a credit rating to speak of, but what do they mean? In short, they’re the score given to individuals that determines whether or not they’re worthy to loan money to in the form of a cash loan, mortgage or any similar product. The higher a credit rating is, the more likely a credit application is to be accepted.
What makes a good credit rating?
Every credit rating is calculated by a number of factors. The most important are previous financial history, current levels of debt, previous instances of financial irresponsibility, previous failed applications for credit, missed or non-payment of bills and constant changes of address. Errors made in previous or your most recent application can also cost you, as can multiple open bank accounts.
Credit ratings are worked out by three main agencies: Experian, Equifax and Call Credit. All three work for the majority of major lenders in the UK, process key data and pass it onto lenders who then use it to decide whether or not to lend money to credit applicants. From the first two, you can find out what your current credit rating is and work out how to improve it.
Take back control of your finances!
Get a FREE checklist for the money moves to make in the New Year.
Also get new articles, advice, and tips delivered right in your email inbox with our newsletter!
Making your score lender-friendly
To try and boost your credit score, there are a number of things you might be able to try. Here are some examples:
Use a credit card responsibly. This might seem like a strange thing to do, but if you use it properly and pay it back, you’re showing lenders how you can manage money effectively.
Try to reduce or wipe out any outstanding debts. This is a sign that you’re trying to improve your finances, and lenders are likely to take note.
Live within your means. Again, lenders see this as a positive, and by only buying what you can afford, the chances of having a loan application accepted will rise significantly.
“Set up a regular savings account and shop around to make sure you get the best rate. Ensure that you are on the electoral roll as this can improve your credit score. Review your day-to-day spending to see if you can make any cuts to increase you’re saving, then set up a budget for essentials and stick to it,” commented a spokesperson from Yorkshire Building Society.
All those tips and more should mean that, at the very least, your credit score will improve enough to boost your chances of being given money by a lender. If not, you can always keep trying until your finances are in good enough shape for a loan, mortgage or similar product to be given to you.