Bouncing Back from Credit Woes: An Expert Guide
Rebuilding Credit: Strategies for Restoring Creditworthiness after Settling a £10,000 Debt
Congrats on cutting your credit card debt! That's a major feat requiring buckets of discipline.
You might be worrying about your current credit score, thinking it's holding you back from loans or even buying a house. Fear not! Let's take a look at some expert advice on rebuilding your credit score.
Helen Kirrane of This is Money chimes in: Well done on kicking debt to the curb! Credit scores are designed to help lenders predict the chances of someone missing a payment within the next 24 months. A low score could hinder your ability to borrow, possibly even missing out on life milestones like buying a home.
It's inspiring that you're eager to boost your credit score! We tapped John Webb, consumer expert at Experian, and Andrew Hagger, director of MoneyComms, for their insights on getting started.
Tips to Reboot your Credit Game
John Webb replies: Nice job slashing debt! Lenders aren't just keen on your credit report but also your ability to repay a loan. They may also look at their own records if you've recently banked with them. Here's why clearing debt can help:
- Your credit report update might take 4-6 weeks to show improvements.
- If you've recently joined the electoral roll, it may not reflect yet but will surely boost your score once updated.
- Closing credit card accounts could lower your credit score as credit reports favor older accounts.
To combat this, consider a 'credit builder' card (check eligibility first), use it occasionally, and pay off the balance each month. A small food shop of less than £50 should do the trick.
Building a credit score is a step-by-step journey. Being on the electoral roll, having a checking account, and consistent payments for utilities, mobile, TV, or broadband can positively impact your score as long as they're paid promptly every month.
Difficulties with previous credit cards, like missed payments, might have less impact over time, especially if they're older than one year.
Andrew Hagger replies: Don't shy away from checking your report because of that low score - you're definitely not alone! To mend your credit health:
- Prove you can handle your existing credit by using a credit card carefully for essentials and fully repaying the balance each month.
- Being punctual with credit card repayments and consistent usage will over time show that you can manage your credit responsibly, gradually bettering your score.
- Always think twice before opening new accounts as settlement offers could flag you as a risk to lenders, potentially restricting access to more lucrative deals.
- Be cautious with finances and only open accounts when essential.
Money-Saving Tips and Tricks
- Check the latest Isa offers: Clear debt, save money, and invest wisely.
- Fix your energy bills: Cut down on energy usage and save!
- Free fee-Isa investing: Say goodbye to hidden fees and hello to savings!
- 5.70% cash Isa: Earn more on your savings with a competitive cash Isa rate.
- Sipp cashback: Extra cashback on your Sipp investments? Why not?
- By clearing credit card debt, the update on your credit report might take 4-6 weeks to show improvements.
- If you've recently joined the electoral roll, it may not yet reflect on your credit score but will surely boost it once updated.
- Closing credit card accounts could lower your credit score, as credit reports favor older accounts, such as when using a 'credit builder' card.
- Building a credit score is a step-by-step journey, and regular prompt payments for utilities, mobile, TV, or broadband can positively impact your score.
- Difficulties with previous credit cards, such as missed payments, might have less impact over time, particularly if they are older than one year.
- To mend your credit health, prove you can handle your existing credit by using a credit card wisely for essentials and fully repaying the balance each month, and be cautious with new credit accounts, as opening them frivolously could limit access to more favorable deals.
