It took you months to find the perfect mortgage offer only to have it declined because of a poor credit score. Or maybe it was for a personal loan so that you could buy that car of your dreams, or finally get away on that luxury retreat.
It sucks when you have credit declined just when you need it most. It leaves you feeling frustrated and hopeless, without knowing the reasons why it was declined.
Read these 5 common mistakes people make when they are trying to improve their credit score, so you can almost guarantee a big approving ‘tick’ next time you apply:
1. You use too much of your available credit
Just because you have credit available to use, this doesn’t mean that you should be using it in full each month. If you use a lot of your credit, lenders will see you as a greater risk.
Aim to use less than 35% of your available credit e.g if you have $1000 credit available, try to use less than $350 of this each month)
2. You stop using older credit cards
The longer you have a credit account open and in use, the better it is for your credit score. If you transfer an existing balance to a low introductory interest rate, this is considered new credit and will not improve your score.
Make sure, even if you transfer to a new card, that you are still spending a little on your older credit accounts and repaying these in full each month.
3. You don't have a direct debit set up and miss repayments
Make sure you don’t miss a monthly payment to your credit card provider, phone bill, utilities etc. This is a big red flag to any potential lenders and can serious hurt.
Avoid this by ensuring you have a direct debit set up every month, preferably to repay the balance in full.
4. You apply for new credit offers too often
Each time you apply for a new credit card, lenders will run a credit check which lowers your credit score every time.
Of course, it’s normal to apply for credit every once in a while, but if lenders see that you are applying for credit too often, they could think you are desperately seeking credit or living beyond your means.
Keep your new applications to a minimum and no more than once per year.
5. You don't know the difference between a 'hard hit' and a 'soft hit' credit check
‘Hard hits’ are credit checks that appear in your credit report and negatively affect your overall credit score. Anyone who views your credit report will see these checks so keep them to a minimum.
‘Soft checks’ are credit checks which only you can see on your credit report and do not impact your overall credit score.
6. You don't diversify your credit options
All too often, we see people sticking to just one line of credit e.g credit card. By using different types of credit, from small personal loans, credit cards and other lines of credit, you will give your credit score a boost (providing you pay these in full each month)
7. You don't have access to your own credit report
Possibly one of the most important things you get from a credit report service is insight. Without access to your credit report, you won’t be able to see what is negatively impacting your score and ways you can improve it.
Without this insight, you have absolutely no idea how or why your credit score isn’t improving, or worse, why it is in decline.
And the best bit...
We have teamed up with Credit Verify to offer our readers a 7 day free trial. No obligations and cancel anytime. Simply register, verify your identity, and get instant access to your personal credit report today.
Today is when you start to repair your poor credit history so you never get declined credit again.