Imagine you were at a weight-lifting competition, who would you place your bets on… the bulked up competitor or the thin opponent?
The answer’s pretty clear, isn’t it? This is similar to how a lender sees different types of credit histories. If you have a bulked up credit report showing a history of good money management, the lender will feel more comfortable with approving you for credit as you don’t pose too much of a risk.
However, if you have a thin credit file, the lender has no evidence on how well you manage credit. Because of this, they question if you’ll repay what you owe on time – so they might decline your application because the risk is too high.
Why should I improve my credit score?
Your credit score will be with you for the rest of your life and it plays a big part in shaping your financial future.
Would you like to get easily approved for a credit card? Would you like to save hundreds of pounds on loans because of lower interest rates? And would you like to get accepted for a mortgage someday? If you answered yes to any one of these questions, you’ll need a good credit score.
This is why you should never overlook your credit score or think it doesn’t matter, because it really does!
Okay, let’s fix your thin credit history
1) First things first, if you get rejected for credit, don’t keep applying for more
Why? Because the lender might be conducting a hard search to see whether you’re creditworthy. This will leave a footprint on your credit report and it can impact your credit score. Lenders can also see these marks and they might feel uneasy if you’ve been frequently applying for different sources of credit.
If you do apply for more credit, make sure you use an eligibility checker first as it’ll tell you if you’re likely to be accepted. The good news is this will leave a soft search on your credit report only you can see and it won’t affect your credit rating!
2) Don’t let your rent payments go to waste
Rent payments don’t automatically get recorded on your credit history which means they do nothing to improve your credit score.
But it doesn’t have to be that way! Sign up to CreditLadder and you’ll get rewarded for paying your rent on time. CreditLadder will inform the credit reference agency, Experian, who’ll add it to your credit report, and over time this could increase your credit score if you consistently make the required payments.
You might think ‘what does this have to do with my credit score?’ but there is a good reason behind it. Lenders use the information on the electoral register to verify your personal details and help prevent fraud.
In fact, registering to vote could add up to 50 points on your credit score. This could make all the difference if you have a thin credit history or low credit score – so make sure you sign up today if you’ve not already… just go online to GOV.uk.
4) Pay your bills on time and by Direct Debit
ClearScore states that your utility bill payments might form part of your credit history if paid via Direct Debit – so be sure to set them up with your bank! Doing so will also stop you from forgetting or missing the payments – just make sure there’s enough money in your account!
For more details on what actually shows up on your credit report, find out here.
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Intelligent Lending Ltd (Credit Broker). Capital One is the exclusive lender.