There are mixed messages with regards to what will help or hinder a credit score. This is partly because different companies have different ways of calculating your credit score, but it is also because some people want to convince you that their particular product will help so that you take it out. It is very wise to be careful when thinking about credit ratings.
Debt and Credit Ratings
It is true that a potential bad credit lender, landlord etc will want to take a look at your credit rating to find out whether they can trust you. They will want to see whether they can rely on you being able to repay the money that they have lent you or pay your rent each month. They will often therefore, look for evidence that you are capable of making regular payments. This means things like payment of rent, utility bills or it could be regular loan repayments. If you are not missing any of these payments, they will see that as a positive sign. However, if you miss any repayments, they will usually see this as a bad thing. There are rumours, that some lenders like to see a person miss a repayment or two because they know that if they do this with their loan, they will be able to charge them more money and gain from them. Whether this is true or not is hard to say and a landlord will certainly not want to see this. It is usually better, both for you and your credit rating to make sure that you pay everything on time, as you will save money and you will also prove that you are reliable. If you have not had a loan before, you cannot prove that you are capable of repaying and this can lead some people to think that it will be worth taking one out. However, this could backfire if you struggle to repay it and if you are already making regular payments, perhaps on mobile phone contracts, utility bills etc, then this should be enough to provide evidence that you can be trusted without taking out a loan. The cost of the loan will not be worth it.
Alternatives to Improving Credit Rating
There are alternative things that you can do which can improve your credit rating which do not involve borrowing money and will therefore be safer. Check your credit rating to start with and make sure that all of the information on it is correct. Then look at it and see whether you have things in there which go in your favour, such as you name on utility bills etc. If you do not, then see whether you can get this changed. Perhaps swap some of your household bills into your name or joint names so that you have some evidence that you are jointly responsible for making regular repayments. It could also be wise to make sure that you are repaying any loans you have on time and perhaps even trying to repay them early. It is also a good idea to see whether you can earn more money as your earnings are also a big factor in your credit score. So, whether that means doing more hours to get more pay or taking on a more permanent job this could all help you out. Getting more income will not only help your credit score but it will also be good for you as well as you will have more money available to spend on things and you will be less likely to need to borrow money as well.Read More