When you have bad credit, it can feel like there’s no recourse. No matter what you do, you’re getting rejected from loans left, right, and centre, and you just can’t seem to get back on the ladder. Don’t despair – there’s always something you can do if you find yourself saddled with a poor credit rating. This happens to more people than you might think; almost 40% of UK adults admit to having missed at least one debt repayment, which can stand you in very poor stead when it comes to your credit rating. Here’s what to do if you find yourself in this situation.
Don’t panic
The first and most important step to dealing with a bad credit rating is not to allow yourself to panic. There are several reasons your score may have dropped that don’t have anything to do with a missed repayment; indeed, some of them may even be out of your control entirely, so make sure you know what the situation is before you react. When you do discern the cause behind your bad credit rating, it’s time to think about proactive steps to fix it rather than just despairing and thinking everything is lost. It’s never the end!
Look into bad credit loans
Believe it or not, there are companies out there who will provide you with bad credit personal loans. These loans either don’t take your credit score into account or are far more lenient when it comes to judging you by that score, so no matter how poor you think your score might be, it’s always worth firing off some enquiries, because you just might get a reply. No matter how bad things seem, you can guarantee that someone else has been in your situation and managed to get out of it, and bad credit personal loans can even help you to do so!
Try to make repayments
It sounds obvious – and it might be the reason you’ve found yourself in trouble in the first place – but one of the best ways you can rid yourself of a poor credit rating is to try and make repayments as promptly as you can. This means combing your financial statements to see what the most pressing and urgent debts you have are, and then trying to find the money to repay them. Even making small repayments can help you make significant inroads into improving your credit score, so don’t think a repayment won’t help, no matter the size.
Comb your credit score for errors
Everyone makes mistakes, and this is true for your credit score as well. All too often, your credit score can contain errors that have been wrongly recorded as being detrimental. For example, payments you’ve made are sometimes erroneously recorded as missed, or addresses could be noted down wrong by different companies. It’s important to regularly go over your credit score and make sure that all the information is correct. You never know what you might have missed; sometimes, a bad credit score can be solely down to a mistake!
Don’t bunch applications together
Applying for multiple things in succession – credit cards, for instance, or personal loans – can have a serious negative impact on your credit score. This is because companies see that you’re applying for a lot of things at once, which they can interpret as meaning your finances are in trouble. This might not be the case, but it’s what lenders and other companies might think when they see the applications, so try to space them out if possible. This makes you look more in control of your finances and will therefore have a greater positive impact on your credit score.
Don’t assume all lenders are against you
As the excellent MoneySavingExpert points out, in the UK, there’s no such thing as a credit blacklist. Each lender will assess your credit score differently and decide whether to give you a loan on their own merits. This means that if a lender rejects an application, that doesn’t mean another one will. Sometimes, companies can prey on the fact that applicants don’t know this, leading to unnecessary payments or fear on the part of the applicant. Remember that a single rejected application isn’t the end of the world and doesn’t mean everyone will reject you.
Don’t max out credit cards
You should try to aim to be below around 40% of your maximum credit limit if you can. This looks good to prospective lenders because it shows that you don’t need to use all of the credit that’s available to you. If you’re consistently maxed out, that could look like you’re always in financial trouble to lenders, which will make them less likely to lend to you. If possible, try to avoid using your credit cards too much, and when you do use them, make your repayments as promptly as you can. This will stand you in good stead with lenders.
Consolidate debt
Consolidating your debt could help you to improve your credit score. By taking out a single loan and using it to wipe out various different loans, you’re ensuring that you’re only making repayments to a single source, which looks more attractive to lenders as it shows that you’re not in debt all over the shop, so to speak. Some lenders will even offer special consolidation loans with specific interest rates or fees, so make sure to enquire about this if you’re looking for a loan. It could be your way out of a bad credit rating and towards financial security.
