How to Rebuild Your Credit Rating

There is no need to be ashamed if you end up with a bad credit record. Poor credit can happen to anyone and it isn’t always your own fault. Unfortunately, rebuilding a credit score is the ultimate Catch 22 situation – you need to borrow money to show that you can manage it better, but nobody will lend you anything. It is a difficult problem to fix, but there are solutions out there.

Check Your Credit File

Sometimes a poor credit rating is caused by mistakes on your credit file. If you have been knocked back for a loan or credit card and you genuinely can’t understand why, it is a good idea to request a copy of your credit file from each of the three main agencies and go through it with a magnifying glass. You may find that someone has fraudulently run up debts in your name, there are incorrect entries, or an old debt hasn’t been wiped off. Even something as simple as not appearing on the electoral roll will make a huge difference. So if you do discover there are errors, request to have them removed.

Take Control

Before you do anything, you need to take a good, hard look at the reasons why you have ended up in this situation. It may be that you like living beyond your means, or because you are not good at managing your personal finances. In either case you are going to have to take control of your money and start being a bit more responsible with it. After all, there is little point in spending time and effort rebuilding your credit rating only to end up in the same boat a few months down the line.

Small Steps

First things first, you need to start paying off your debts and this can be done by agreeing a payment plan with your creditors. Next, make sure you cancel any unused store cards and credit cards you have lying around, as any extra credit can muddy the waters and make it appear as if you are about to go on a massive spending spree; it also stops fraudsters using them in your name. 

Long-Term Solutions

When it comes to longer-term solutions, there are several ways to rebuild a credit score.

  • Make repayments on time – Sounds obvious, but this is something you must do above all else. Any more missed repayments and you’re credit score will be in the minus figures.
  • Pre-paid cards – These are dead simple. The lender lends you a small amount of money and in return you pay the ‘loan’ back over an agreed term.
  • Credit-builder cards – ‘Bad Credit’ cards charge a much higher rate of interest when compared to other UK home and personal loans, but their acceptance rate is also higher, and if you make the repayments on time they can help rebuild your credit score.
  • Poor credit loans – This type of loan is ideal for people who don’t qualify for regular loans, but the interest rate will be higher.

It is worth trying to rebuild a credit score for you never know when you might need to borrow some extra cash.

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Pete White Pete White

Love Shrewsbury editor and chief developer at The Web Orchard, find out more on petejwhite.com

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