*Article updated for 2020 to add more information and include more resources
Overcoming bad credit can feel like a bit of a minefield. It can be difficult to know where to start because there is a lot to consider when you’re dealing with your own finances. Chances are you’ve got bad credit because you’ve either made an error when considering affordability, or you’ve been in a position where you’re circumstances have suddenly changed beyond your control. I had bad credit due to a combination of the two, and I’ve managed to improve my credit rating no end by doing the following things:
Ways to Overcome Bad Credit
Wait it out
This probably seems like the least proactive option to overcome bad credit, but sometimes it’s the only thing you can do. If you’ve had an IVA, bankruptcy or even just defaulted on one or more accounts, then you have no choice but to wait for time to pass. The more time that passes since these negative events on your credit file, the more your credit rating naturally improves. Pay all of your bills on time while you wait and your score will improve on its own.
Get a credit card to rebuild your rating
As I’ve mentioned, I had a bad credit score myself. As soon as I could, I took out a credit card for someone with bad credit. I didn’t do it with the intention of running up more debt, but with determination to improve my credit score.
I took out my credit card with Vanquis because they take customers like me who had a bad credit rating. To improve your credit score with a credit card you need to spend an affordable amount on it each month, but settle the full balance every month too. This way, you don’t pay any interest, but your credit file will see a pattern of responsible borrowing. When you have poor credit, borrowing generally costs more, so don’t be surprised to see a higher interest rate on borrowing. Don’t forget that this doesn’t matter, your intention is to settle the balance and not incur any interest.
Check your credit file yourself
You can check your credit score for free from several websites these days. In the past you needed to pay a website subscription fee for this service, but there’s no need to do that now. If you’re checking your score on a site that charges, then a quick Google search will point you in the direction on a free credit checking service.
Dispute any discrepancies
Once you’ve got access to your credit file, you’ll be able to see if there is anything on it that shouldn’t be there. Any errors can needlessly harm your credit score. You can pay £2 and send away for a full report from Equifax for a more detailed view. If there is anything on your file that shouldn’t be there (such as a default that’s still listed even after a bankruptcy) then you need to dispute it in writing, with that company directly. Removing errors can improve your credit score no end.
Sign onto the electoral roll
Signing onto the electoral roll can help improve your credit score because it essentially helps prove you are who you say you are. It’s a really low effort way to help overcome bad credit, and so simple to do!
Keep an emergency fund
The best way to overcome bad credit is to pay your bills on time every month. Building up an emergency fund helps ensure you won’t fall behind on payments in the future. If need to be off work for any reason and you don’t get paid, an emergency fund can keep your finances ticking over and take any additional stress out of the equation.
The above points are just a few examples that I have personally used to improve my own credit score. There is actually a lot more that can be done to increase the likelihood of being accepted for credit. I recently read an article that busts some common credit file myths that even I didn’t know. It’s really important to get common misconceptions straightened out in your mind – it would be terrible to inadvertently harm your credit score when you think you’re working towards improving it.
The biggest thing to remember is to always do your homework. Keep on top of what the experts say and always take care when it comes to paying your bills on time.
