Your credit score is mostly based on whether you are paying your bills on time and how much debt you have. Naturally, this means it will take time for your score to increase or decrease as your debt level changes and your bills are paid.
Luckily, even if you have a credit score that makes qualifying for a car loan difficult, there are some quick and easy things you can do to improve your credit score and get approved for a loan to buy the car of your dreams.
Make sure you’re on the electoral register
The electoral register (also called the ‘electoral roll’) is a list of the names and addresses of everyone who is registered to vote in the UK.
If you’re not registered on the electoral roll it will be harder for you to increase your credit rating, making it more difficult to get approved for a car loan.
You can register as an eligible voter either online or by post. Alternatively, you can contact your local Electoral Registration Office to check if you’re already on the register. If you are asked to register but fail to do so, you may be fined.
Keep your credit utilisation low
Credit card utilisation is the percentage of the credit available to you on your credit card that you actually spend. For example, if your credit limit is £4,000 and you use only £1,000, then your credit utilisation would be 25%.
It is worth remembering that your credit utilisation is calculated using the total credit that is available to you on all of your accounts.
The lower your credit utilisation, the more likely it will be that lenders will perceive you as being in control of your finances, and they may be more likely to approve your loan. When your credit utilisation is high, lenders may believe you are struggling financially and too reliant on credit, which can dissuade them from offering you even more credit.
There are a few ways to lower your credit utilisation, including paying off debt or not cancelling credit cards you haven’t used. Other options would be transferring your credit card debt to a 0% balance transfer credit card or asking for a higher credit limit overall.
Look out for errors on your credit rating
Look out for any errors when you check your credit rating, even if they seem inconsequential. This can be something as small as having the wrong address or as serious as fraudulent activity, such as someone taking out or applying for credit using your name or financial information.
If something looks suspicious to you, call the credit reference agency (Experian, Equifax or TransUnion) right away to fix the problem and avoid further damage to your credit rating.
Pay your bills on time
Paying your bills on time will show potential lenders that you manage your finances well and don’t delay payments owed to your Internet provider or phone company, for example.
There are quick and easy ways to ensure that this is done consistently, such as creating a list of all of your regular bills, adding payment due dates to a calendar, and setting up reminders or automatic payments whenever possible. These actions will make it much harder to forget to pay your bills and can help boost your credit rating.
Reduce your debt
Reducing your debt is the ultimate way to increase your credit rating. While this means different things for different people, there are some small steps that can benefit everyone who has debt that needs to be paid off.
These steps can include paying more than the minimum balance, minimising your credit card spending by changing your habits and selling unwanted gifts and household items.
If you take just some of these easy steps, you can boost your credit score in as little as 30 days and multiply your car financing options to buy the wheels you’ve been dreaming of!