‘Bad credit’ is often used as shorthand for people who have a less-than-ideal credit score. And if you have a poor credit rating, or perhaps a non-existent one, you may feel at a complete loss as to how you can rebuild it.
You might be hoping to get a mortgage and buy a house one day, or maybe you simply want to be able to take advantage of the best deals available on credit cards and loans and know you’ll need a good credit rating to be able to do so. However, if your credit score is pretty low you could be worried about what on earth you can do to improve it.
Luckily, there are steps you can take:
Understand your credit score
First thing’s first: you need to understand your credit score. We have written before about how financial service providers score applicants and what information is contained in your credit report, and understanding all of this really can help you take steps to improve your score.
For instance, your credit score might be hampered simply by the fact you haven’t updated your address for all of your current credit agreements, or because an account you have paid off and closed is still marked as active. Checking your credit report regularly through credit reference agencies like Experian or Equifax allows you to see what your lenders see and take steps to update and correct any incorrect information your report may contain.
Start to build your credit history
What many people don’t realise is that it’s not just a history of poor credit management that can harm your credit score; it’s also not having a history of borrowing at all. If you’ve never borrowed before you may feel confident applying for a loan or mortgage, only to be surprised when you’re turned down.
The thing is, your lenders may want to see evidence that you know how to borrow responsibly and that you’re able to pay back what’s loaned to you. If you don’t have a credit history, they have no evidence of this.
On the flipside, your credit rating may have been damaged because you did get into difficulty when borrowing in the past. Anything from a few missed store card payments or a late mobile phone payment to a loan you’ve defaulted on can show up on your credit report and affect your score as a result.
Typically, missing payments and defaulting on your agreements will show up on your report and affect your credit score for up to six years, and during this time borrowing may be more difficult. Depending on your circumstances, you may find it tough to borrow at all, or that the deals you’re offered come with a high rate of interest attached to them.
Using a credit card could help to boost your score
As well as ensuring all of the details on your credit report are correct and up to date, there are other ways to improve your score. For instance, you could take out a credit card and start building or rebuild a record of responsible borrowing.
In general, you tend to borrow smaller amounts on credit cards than you would with a loan or mortgage. You may therefore find it easier to obtain borrowing and make repayments in this way than for loans of larger sums.
Of course, as with any form of borrowing, the same rules apply: you must stay within the borrowing limits agreed with your lender and keep up with your repayments on the credit card or you could damage your credit score even further, as well as incurring penalties from your lender. By paying off your balance in full every month, you should avoid paying any interest, which will make your borrowing more affordable.
You should also remember that not paying off your borrowing in full each month could mean you pay more with a credit card than with other forms of lending. You should also be aware that fees can apply for credit card services that you may not be used to with other forms of lending, so make sure you read and understand the small print.
The Ocean Credit Card for bad credit is designed for people with less-than-perfect credit scores. With an available limit of between £200 and £1,500, there are no annual fees and you may find you are more likely to be approved for borrowing than elsewhere. You must be aged over 18 and on the electoral roll (but meeting this criteria is not a guarantee of acceptance). The Ocean Credit Card has a 39.9% APR Representative (variable) and can be managed any time online or on your smartphone.
If you have a history of bad credit, it may not necessarily be the end of the road for you as far as borrowing is concerned. It may take time, but you can show that you’re a responsible borrower again.
The Ocean Credit Card is issued by Capital One (Europe) plc. Ocean Finance promotes the Ocean Credit Card in partnership with Capital One.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.