If you’re looking to boost your credit score and don’t know where to start, this blog is for you.
Whether you’re taking out a mortgage, payday loan, borrowing money or taking out a credit card, you want to know that your credit score is in good shape. Improving your credit rating opens up a world of possibilities for your financial health. These benefits can include anything from lower-interest products to saving on your insurance. These are great ways to keep your monthly costs to a minimum.
It’s worth mentioning that having a good credit score doesn’t guarantee approval for various products. But it does put you in a good light in the eyes of a lender like Drafty.
While there’s a lot of information available regarding how to boost your credit score, there’s little guidance around things to avoid – which is where we come in. In this blog, we`ll discuss credit building mistakes to avoid. Hopefully, helping you to make informed choices in the future.
1. Avoid applying for lots of credit at once
When applying for credit, many lenders may not look so favourably at those that have made multiple applications in a short space of time. There are a few reasons for this, which include:
- It makes companies question why you were rejected by other lenders.
- It might appear as though you’ve got a long-term financial issue, rather than an unexpected cost – not a valid reason to apply for credit.
Applying for lots of credit at once could hurt your credit score. This makes you less likely to be accepted by future lenders. So make sure that the applications that you do make are right for you. There is a multitude of options out there but not all of them will suit your financial situation.
Take the time to read up on the benefits, repayment options, interest rates and reviews before you start.
2. Avoid making late repayments
Late payments will hurt your credit rating. However, the extent of the damage will depend on the current state of your credit profile and how far you’ve fallen behind with your repayments. If you have a great credit rating, one late repayment may cause damage that takes some time to undo later.
What’s more, late repayments often come with additional fees that you must pay back along with the initial credit loan and interest. The more that this happens, the less likely you are to be able to pay back your credit, potentially leaving you in an endless borrowing cycle.
To avoid making late repayments, stay vigilant on your repayment dates. Ensure that you have transferred, paid or have enough money in your bank to clear your debt at the end of the month.
3. Don’t dodge credit
For many people, taking out loans when they have bad credit is an overwhelming prospect. With so many horror stories surrounding people drowning in debt, it’s understandable that it’s viewed as a scary thing. However, not taking out any credit could actually have an adverse effect on your credit score. For example, when you apply for a payday loan, lenders need to see proof that you’ve managed your finances and made repayments on time if you’re eligible.
Keeping on top of your repayments is a way to improve your credit rating. Companies will see you as reliable, making them more likely to offer you credit in the future. A key point to note here is that drafty offers you credit at Representative 96.2% APR (variable). However, never take credit out that you don’t need or can’t afford as this might lead to financial issues in the future.
4. Keep checking your credit score
Not keeping an eye on your credit score isn’t sensible. While you might be scared to see the results, it’s the only way to know if things are going in the right direction. Making small changes to gradually build your credit score will help you to reach your goals. Building credit takes time, especially if you’re starting from a low score, so be patient and don’t lose hope.
5. Don’t close down your old cards
Having lots of credit open at once isn’t always a good idea, especially if you’ve been inconsistent with repayments. However, if you’ve paid back your credit in full and on time, it’s not necessarily a bad thing. Having old credit cards that have been used responsibly demonstrates to future lenders that you can manage credit responsibly and aren’t a risk.
If you’re in a good financial position, apply for a Drafty line of credit. We provide a Representative 96.2% APR (variable). Check our Drafty line of credit reviews on Trustpilot here.
Disclaimer: We are not providing financial advice, these are just tips for informational purposes. Also, we are not affiliated to any of the external parties, these links are provided for reference only.
