Making sure that your credit rating is in good condition can be a tricky thing. There are a lot of contradictions when it comes to managing your credit score; some things which may seem to be a good thing can actually impact negatively on your rating, and vice versa.
Most of us know that we actually need to use credit in order to build a good credit history. If you’ve never borrowed money before, then there’s no way for other lenders to know that you will be responsible and pay it back in full and on time. Of course, a past history of these never means that you’re a 100% ‘safe bet’ in the lender’s eyes, but a proven history of repayment is better than nothing or, even worse, a proven history of missing payments altogether.
What many people don’t know however, is that using too much of your credit can be seen as a bad thing. Frequently overspending so that you’re always on the very edges of your credit limit could show that you aren’t in total control of your money, and lenders like to see stability above all things. Using credit little and often, and always staying under your maximum limit is a good way to show that you’re credit-worthy, particularly if you regularly make payments which are over the minimum amount if you’re using a credit card.
Many lenders are wary about people who appear to live beyond their means. Remember that consistently spending more than you earn is going to backfire one day, however responsibly you do this. Stability and responsible handling of your cash is the key to a good credit rating, so with this in mind, you should also think about the type of borrowing you’re doing. For example, payday loans, although a handy way to get yourself through until payday, can be detrimental to your credit rating, even if you pay them back in a timely manner. This is because they’re seen as a last resort way of borrowing, where you only apply if you need a last minute cash injection. Although this may not be your reason for borrowing from a payday lender, the people who are looking at your credit history don’t know this.
If you’ve had problems with money in the past, or if you think that you will be seen as an ‘irresponsible’ spender due to how you handle your existing credit, then it’s not too late to make some changes. The sooner you can start behaving in a more credit-worthy way, the better. Lenders will respond to this, even if you’ve only been doing things differently for a couple of months. If you have mistakes or incidences on your file that are harming you but which cannot be removed, you are allowed to write a statement explaining to potential future lenders what has happened. If this is the case, it’s always useful to fight your corner, although this will mean that normal credit searches being carried out upon you may take a little longer than usual.