Having a good credit score is more important than ever, especially if you are thinking of applying for a mortgage or car loan. And if you are one of the 18 million Brits with a poor score, increasing that score can seem an overwhelming task. However, the good news is that it can be done, although it takes time and you shouldn’t expect to see positive results in just a few days.
On Your Credit Score Report
The first step is to actually look at your credit report and see what’s on there and which areas you can improve in. It’s become easy to look at your credit score online, and signing up to do that should be your first step. An astonishing 25% of credit reports have errors on them; often even a small mistake can adversely affect your score. If you identify an error, such as a credit card wrongly assigned to you, an account designated as past due, or inaccurate unpaid bills, you will need to contact the three credit reporting agencies in writing and ask to have the wrong information removed. Expect that process to take at least a month or two, and you may need to supply supporting paperwork.
Ways To Improve
One of the easiest ways to improve your score is to take care of any accounts that are in a collection, such as credit cards, store cards or other unsecured loans. It can be overwhelming if you have many collections listed. Take it one at a time. Most collection agencies will accept an amount lower than the total amount due, and you will have to call them and negotiate an amount. It isn’t the easiest thing to make yourself call and discuss money you owe, but most collection representatives are helpful and professional and would instead accept part of the amount than nothing at all. If you owe £500 for example, the collection agency handling the delinquent account may settle for half of that amount (as long as bailiffs haven’t already visited).
Keep All Correspondence
Make sure to keep notes of all phone conversations and copies of any correspondence sent. If you settle an account for less than the amount owed, it should show on your credit report as paid, although you can expect the process to take at least several weeks. If you have several accounts in collection and can get the information removed from your credit report, you can expect your score to increase by at least 20 points, depending on the amounts and how long the accounts have been open.
It’s Over, Forget It
A charged-off account is one that shows on your credit score, but the lender has now assumed that you are not going to make any more payments and has charged off the debt, or just given up trying to collect it. You can call your creditor to settle a charged off account, although be careful of just making a small payment towards the overall amount, as this will reactivate the debt, making it appear more recent. In many cases, it’s more useful to let old debts slide – the more time that goes by, the less effect they have on your score.
Not Too Many
It’s okay to have a credit card but try not to have too many on the go. If you have several cards, try to pay off and close some of them, focusing on the most recent ones. Potential lenders like to see established credit, so keep at least one old card active. As a general rule, try to keep the balance owed on your cards to less than about 30% of the available balance.
On Time, Every Time
And more important than you might think when it comes to improving your credit score and keeping the score low is paying your bills on time. Whereas everyone is late occasionally, it’s especially important to pay your credit card bills on time and make your car payment, and rent or mortgage payment on time. If you know you are going to be late paying something, call and ask for an extension or a change to the due date.
Cha, cha, change
In general, it takes between three to six months before you should expect to see any changes to your credit score. There are credit repair companies who can tackle the job of analysing your credit report and trying to improve your score, although everything they can do, you can address yourself. It may also pay you to participate in a debt consolidation program; a debt consolidation company will negotiate lower payment amounts with your creditors, making it easier to pay your debts and catch up.