At times, you might need to pay for an emergency medical procedure or have a once-in-a-lifetime opportunity that you do not want to miss and need financing. Having to borrow money and realising that your credit rating limits the amount of money that you can get or the cost of the loan can be problematic. Unfortunately, your credit score is calculated using indicators that show your ability to handle your personal finances in the long term. As a result, it can be difficult to increase in a short amount of time.
This having been said, there are a few things that you can do to quickly boost your credit rating up to the point where you will get a better interest rate and, possibly, better overall terms and conditions. As a word of warning, please keep in mind that each of the following tips can help increase your credit score, however, they should all be used at the same time to get results that will have a considerable impact on the cost of your loan.
- Consolidating Your Debt Can Go a Long Way
Debt consolidation is one of the best ways to quickly increase your credit score. By taking out a larger loan that you can use to repay several, smaller forms of debt, you will not only make it easier to keep track of your monthly repayments but also increase your credit rating.
Keep in mind that when taking out a debt consolidation loan, part of it should go towards paying off your credit cards. This will reduce your credit utilisation ratio.
Generally speaking, your credit utilisation ratio refers to how much money you are using out of the sum that you’ve been given access through a credit card. For example, if you have a credit card with a £5,000 limit attached to it and you have used it to pay for £2,500 worth of products or services, then your credit utilisation ratio will be 50%. This can reduce your credit rating because it will signal lenders that you need the extra financial wiggle room in order to pay for your expenses.
By using a debt consolidation loan, you will be able to both pay off your credit cards and also repay most, if not all, of your smaller loans such as payday advances and some unsecured personal loans.
- Consider Using Online Lending Services As a Credit Card Alternative
If you are going through a period of financial instability and need money prior to applying for a loan, consider using an online service to borrow what you need. These services do not perform credit rating checks and do not report smaller loans to national credit registers, which means that the transactions will not be part of your financial history.
- Refinance Your Costly Loans
Although it may not seem important, especially in the grand scheme of things, the cost of your current loans will have a big impact on your credit rating. This is due to the fact that most lenders will look at your income and then at the monthly repayments that you have to make. If the monthly repayments eat up too much of your monthly income, lenders will likely ask for collateral to give you a loan or refuse your request altogether.
If you have expensive outstanding loans, consider refinancing them. In the case that you have managed to consolidate most of your debt and are only left with one, larger loan that you have to pay, consolidating it will further increase your chances of getting great terms and conditions for future deals.
Use All Methods for the Best Credit Rating Increase
All of these options can be used at the same time, and most can be applied shortly before requesting a loan. It usually only takes one week to get a debt consolidation debt or to refinance a loan, and in the meanwhile, you can use online services in case you urgently need money.