How Does A Low Credit Score Affect Your Borrowing Options?

Your credit score is an ever changing financial record, a record which reflects your responsibility status with money, and tells lenders whether they can trust you to meet repayments or not. If you have a low credit score, this might be because you have missed a mortgage payment, defaulted on a credit card payment or failed to pay back a loan. If you have a CCJ, this can also tarnish your credit score. This means that when you apply for some form of credit (even a bank account) the lender will judge your application on what you’ve done in the past.

“This isn’t fair!” We hear you cry!

Many people don’t want to be ruled by past mistakes. A connection with a partner who spent your money irresponsibly could have affected your own record. But it’s OK. You can reverse the effects of a poor credit score with some simple steps. Yes, it does take time, but some people see the benefits within just a few months.

4 Steps to Reversing Your Low Score

This blog post outlines 4 easy to follow steps for improving your credit score in their blog post. It is handy to follow these tips because they are achievable right away, and really will impact your credit score:

  • Always pay your bills on time
  • Always pay the full amount that is owed each month
  • Make sure you live within your means
  • As a general rule, don’t use more than 30{4348bc372134b33f547a4abc8ca54ec2607be38c3666d40c870df9bbc4170cc9} of your credit available to you

How to Check

Once you’ve had a few months of following Wonga’s advice above, you’ll probably want to know whether it has worked. There are some free online tools you can use to check your credit score. They can often give you an indication of your credit ‘hit rate’ i.e. how likely it is that you’ll get a loan or credit if you apply for it right now. This is a good indicator as to your credit score.

Don’t keep applying after rejections

It is tempting to go down the list of lenders and start making lots of online loan applications to see which one would stick. However, this only has negative effects. Lenders can see loan applications on your credit record and will surmise that you are a) desperate for cash and therefore in a poor financial situation, and b) that other lenders are rejecting you, which means perhaps they should too.

So, if you’re applying for a loan, do your research, figure out the best fit for you, and apply just once. If you are rejected, try improving your credit score further and then try again in a few months. It can be a drawn out process, but your credit score is valuable and you should respect lenders’ needs to ensure you are a good borrower before they give you credit.