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Get Out of a Bad Credit Hole

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How To Get Out Of A Bad Credit Hole

If you have experienced difficulties repaying loans or credit card balances in the past and now have a less than pristine credit history as a result, you may feel like there is absolutely nothing you can do about the situation, but this is not necessarily the case. In this short article, you will find a number of useful suggestions that may help you to improve your credit score and thereby increase your chances of success when applying for personal loans or mortgages in the future.

1.   Give it time – this might very well be the last thing that you want to read, but it is important to know that time is a great healer with credit histories as well as broken hearts. County Court Judgements, Individual Voluntary Arrangements, Administration Orders and other similar black marks against your name will drop off your records after 6 years, so there is some light at the end of the tunnel even if it doesn’t feel that way at the moment. If there is any information on your file that you believe to be incorrect, you can lodge a dispute that will appear next to the entry in question whenever potential creditors perform a search.

2.  Borrow more money – this sounds like a crazy idea and if you approach it in a haphazard manner then it could easily backfire. However, if you take a measured approach and only borrow very small amounts to start with, you can rebuild your credit history by making sure that you repay these debts on time and in full. Because you will most likely have to pay a higher rate of interest on the money that you borrow, to compensate lenders for the extra risk they are taking, it is a good idea to keep the amounts as low as possible to avoid any unnecessary expense. As your history improves, you should find that the pool of potential lenders to which you have access begins to grow.

3.  Pay off your overdraft and reduce the balance of any credit cards that you may already have – one of the factors that affects your score is how much of the credit that is available to you is actually being used at any given time. For example, if you have an agreed overdraft of £1000 and a credit card with a £5000 limit, your total available credit is £6000. Supposing that you are currently using £250 of your overdraft and have an outstanding balance on your card of £1250, this would mean that you are only using 25% of your available credit (£1500/£6000), a very respectable figure. On the other hand, if you max out your cards and use all of your agreed overdraft, your score will be correspondingly lower. Any reductions that you can make will therefore have a positive effect on your credit score in the future.

4.  Always make payments on time – whatever outstanding debts you have at the moment, be sure to make your monthly payments on time, every time. If you are in any doubt as to your ability to keep up with the payments that you need to make, consider renegotiating with your creditors to avoid further negative entries on your credit file. Every time that you make a payment on or before the due date, it is noted in your file by the creditor in question, as are late payments of course, and can be seen by potential lenders should they happen to perform a search in the future. As almost all banks and building societies will perform such searches before approving loan, credit card and mortgage applications, it is important to keep your records as clean as possible.

5.  Make sure that your name is on the electoral register if you have not already done so. Lenders like to know that they will not have a problem getting in touch with you should you fail to repay a debt on time so it is important to ensure that you are registered at your current address. Whilst this will not erase any bad entries in your file, it will count as a positive and therefore improve your overall score. To find out how to register, go to this page:  Enter your postcode in the search box and you can find details of the local authority that you will need to contact in order to get your name on the electoral roll.

6.  Never borrow money that you cannot afford to repay – you may feel that this advice has come a little late to be of any real use, but even if you already have a string of bad debts on your credit file, it is still not too late to start doing something about it by borrowing more responsibly. If you follow the second suggestion in this list and take out small loans principally so that you can pay them off on time and benefit from the positive feedback that will appear on your file, it is vital that you take every precaution possible to avoid making any late payments. If you have even the slightest doubt about your ability to repay the amounts that you are proposing to borrow, then do not take out the loans in the first place. It will be far better to wait until you are completely sure because the last thing you need right now is more negative feedback on your credit file.

There is no magic solution that will make the negative entries on your credit file disappear, but if you follow all or even just a couple of the above suggestions, you should find that it becomes easier to borrow money as time passes. Rehabilitating yourself financially cannot be done overnight but the sooner you start, the sooner you will start to see the benefits. Like many things in life, consistent effort over a period of time will yield the best results so try to exercise a little patience as you begin to make these changes.

About the author

Peter Davis Peter Davis is a Marketing Analyst at PaydayLoan123 specialising in financial products. Peter writes most of our articles as he stays up to date with the latest information. He enjoys most sports, particularly playing football and watching his favourite football team. Peter really like his food too as we have all witnessed first hand!

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