What can you do to improve your personal/business credit?
How to improve your credit
Being able to get credit is fundamentally important for every business, whether you want it or not. Having a good credit score is crucial for many reasons- it can influence who lends you money, how much you are lent, and what interest you are charged.
Sometimes, people don’t even know why they are rejected for credit. That’s why we thought it would be useful to put together a little guide on how it works, and how you can improve your credit score!
When you begin to apply for credit, whether it is asset finance, a loan, or a mortgage, the lender will always check your past behaviour. This is so they can predict your future behaviour, and therefore predict how likely you are to make your payments. A number of things are looked at, such as, how much you currently have in credit, whether you meet your payments on time, and how many applications you have recently made.
It is important to know that every lender is different, and just because you have been declined from one doesn’t mean you will be declined from all. If you have never had credit and always paid cash, it can actually make it more difficult to get credit! The lenders may find it harder to predict your future behaviour if you have no history of repaying anything. So, if you are wanting to boost your credit score because your rating is a little lower, or you just want to appear more reliable to lenders- here are some of our tips!
Improving your personal credit
- Check your credit rating regularly and check that the details are correct – using tools such as Experian gives you access to your credit score for free, so you have a good indication of how it looks to lenders. Checking your score can also give you the opportunity to identify any errors in your details, so these can be changed and potentially change your credit rating. If you cannot vote in the UK, for example a non-EU national or non-commonwealth, ensure that you send credit reference agencies proof of address and identity.
- Make sure you are on the register to vote! It can be much more difficult to get credit if you aren’t. This helps lenders to identify who you are, and check you have permission of residency. If you cannot vote in the UK, for example a non-EU national or non-commonwealth, ensure that you send credit reference agencies proof of address and identity. This can be in the form of a driving license or utility bill and you can ask the credit agencies to keep a record of this.
- Check who you are financially linked to – If you are linked financially to owning any products with someone, this sometimes means that they will be searched at the same time as you when you are applying for credit. If there are things on their records that might potentially mean you flag up as higher risk, you may not be accepted. If you can, it is important to financially de-link.
- Use free eligibility calculators- Applying for products can leave a mark on your credit file, particularly if you apply for things numerous times if something gets declined or you are unhappy with the rate offered. There are some useful tools online that perform soft checks, which gives you a good indication of whether or not you will be accepted for a product.
- Meet all your payments on time! Although it seems fairly obvious to suggest this, making sure that all your payments are met, particularly if you live in your own home, can hugely help to show lenders that you are responsible with your lending. If you have a few missed payments, it is important to consider the timings of your applications. If you think it might be coming up to a time where the marks on your credit file will be expiring, it can be beneficial to hold on a bit longer to make sure they have expired before you apply for something else.
- Avoid payday loans- Although some may try to convince you that it helps your credit rating, it does not. especially if you are looking for a mortgage. As well as being very expensive, it can give the impression to lenders that you are poor at managing your money.
Improving your business credit
- Similarly to improving your personal credit, make sure your records are kept up to date- Keep your companies records up to date and share these when necessary, to ensure that you are able to be validated and also avoiding miscommunication if you have changed addresses.
- Keep your personal credit healthy – When you are starting out, lenders will often check your own financial information if the business does not have enough information available, or sometimes if your business has a lower rating, you can apply for finance through your personal records instead. It is always beneficial to make sure you have a good personal credit history.
- Only apply for credit when necessary- Applying for several different finance products and services at the same time to explore all options could be appealing, but if too many applications are submitted in a short period of time this can suggest to lenders that you are struggling financially, or to secure the funding you need. If a credit search is conducted, this can leave a mark on your credit file. Only using finance products when it is beneficial, and not just for the sake of it is helpful in the long run.
In a time where it has never been so important for businesses to make the choices that benefit them the most, choosing the correct finance option is vital. With our expert knowledge and panel of over 80 lenders, we can point you in the right direction and help you to explore all of your options.
You can, of course, decide to go direct with each individual lender who will all perform individual credit checks that will impact your credit score. At Full Circle Asset Finance we try to avoid carrying out credit checks and instead we have a frank conversation with our clients to understand the circumstances. From this conversation we will know exactly what we can do and what finance companies to approach with your finance requirement that will understand your specific circumstances. This preferred course of action not only saves your credit rating but also saves time in getting you the finance product you need.
Don’t work for credit. Allow it to work for you.