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7 Tips For Rebuilding Poor Credit - Including £20 A Month Hack

June 30, 2021, 12:00 PM
  • Members of money-saving community LatestDeals.co.uk provide their tips for rebuilding a poor credit score
  • Advice includes using tools to report monthly rental payments and a £20 a month loan hack

Knowing how to build and maintain a good credit score is a conversation that’s often avoided, but it’s important to face up to your finances and know the best way to handle them - especially if you have goals such as getting a mortgage or buying a car.

Having debts doesn’t have to mean that your credit score is doomed - in fact, making smart repayments and getting a handle on your spending habits is the perfect way to fix the number that may seem to just keep on plummeting. Members of money-saving community LatestDeals.co.uk have stepped in to provide their tips and tricks for rebuilding a poor credit score.

Be Smart With Your Credit Card

While some may consider a credit card to be a pathway to debt, it’s actually a great way to build up a good credit score. The key is using this resource smartly and having a plan - which is something plenty of people have advice for.

Emma Russell said: ‘Pay credit card bills, on time and in full every month.’ Similarly, Michelle Hardy warned that it’s important to clear your cards each month, and advised to use them for paying your bills.

Timing is also important - Lorna Read said: ‘Pay off all debts first. Then get a credit card to put regular expenses on such as petrol and just use it for that and pay in full every month. Don’t go overdrawn either.’

Inevitably, sometimes bills can’t always be paid on schedule. Gary Kittle had some tips for such situations: ‘If it’s too much, pay as much as you can until it’s paid off in full.’

The amount of credit you use is also important. Opinions on what percentage of your credit to use differ, but Sam Townley advised: ‘Never have more than 30% credit utilization across all your credit cards. The more credit you’re using up, the more unreliable you look, which will impact your score. For example, on a 10k limit you’d never spend more than 3k until it’s paid off.

Overall, think about how credit agencies will be viewing your spending habits. Christine Calder said: ‘[Credit agencies] are happier with someone who has a smaller spending limit and is a regular and consistent user who pays up on time or soon after, than they are with someone who has a huge spending limit but rarely uses the card.’

Use Tools To Rebuild Your Credit

There are many resources and tricks out there to help with rebuilding credit - or creating a score if you don’t have one yet. For example, Emma Wood has used a SIM card trick to improve her financial situation: ‘I’ve got extremely bad credit from my younger days, but I got a SIM only deal which is building my credit up. If I wanted now I could get a contract phone, which I couldn’t before.’

Using third party advisors is also helpful. Emma Lloyd-Davies suggested: ‘Contact Step Change for free advice, they’re great.’ Tom Church, Co-Founder of LatestDeals.co.uk, said: ‘Step Change is a great place for people struggling with their finances to get free debt advice online. The support can help with finding a way out of difficult situations, as the advisors come up with the best solution or services for individual circumstances.’

If you’re making regular payments, such as rent, it’s worth finding a tool which will help you use this to your advantage. Charlotte Hasler said: ‘I use CreditLadder which is connected to my Starling bank account. It reports my rent each month to show it’s been paid on time. That helps with my credit too.’ Lindsay Jane Kelly uses another tool for the same results: ‘An app called Canopy helps to use paying rent as a way to help build your credit score.’

Other people made use of a soft loan service. James Lewis Smith said: ‘Loqbox issues you a virtual loan, so on your credit file they list it as if they have given you a loan. Pick an amount of your choice, then repay them for 12 months. They then return the full amount back to you and your credit file will show you’ve successfully repaid a full loan.’ Charlotte Hasler agreed that this tool works well: ‘Loqbox has really helped my credit score, it’s slowly going up.’

Tom said: ‘Loqbox is a relatively new tool for rebuilding credit scores which has given people positive results. The best part is that the minimum amount you can save each month is just £20, and not only will this payment register as a loan repayment on your credit file, but you get all the money returned to you at the end of the 12 month timeframe. Just make sure you keep up with your repayments, as missing any can harm your credit score.’

Deal With Debt Collectors

Calling up debt collectors can be an intimidating prospect, as those who have reached this point may have developed a habit of burying their heads in the sand. However, facing the music is never as scary as you might think. Jemma Chodkiewicz said: ‘Ring the debt collectors - never avoid them. Often they can accept offers of payments to partially settle if you can’t afford to do so fully. You’ll be surprised how much they may discount the debt, and the relief you feel after will be worth it.’

Louise Gardiner has had particular success with her debt collectors: ‘I’ve got a 50% discount on my repayments before, and my credit score shot up once it was cleared. The bigger the debt the better the discount [in my experience]. 70% off a debt of a few thousand isn’t unheard of in some places, and others are known to take 50%.’

Get Used To Borrowing

It may seem counterintuitive, but those who have never borrowed money before may not have a good credit score - and they will potentially find it difficult to obtain loans. Gill Williamson said: ‘I had a problem getting a phone contract. My credit score was low because I never used credit and had every debt or utility bill in my husband’s name.’

Sharon Maddix knows all about this - but offered a few words of wisdom: ‘Strangely you have to borrow to get a good credit score, but it’s like lending a mate a tenner. If they always pay you back then you trust them more and more - same scenario really.’

Tom said: ‘Building - and maintaining - a decent credit score is all about maintaining a fine balance. You need to take out credit, but also pay it back in good time - and do so consistently over time to build up a good reputation.’

Consider Debt Consolidation

Gary Kittle offered advice for reducing interest on debt: ‘If you can, get a bank loan to pay off all your credit card debts etc. This will give you only one line of credit and a much lower interest rate than the credit cards.'

Tom said: ‘Consolidating your debts is a good way to make repayments easier if you’re struggling to keep up with multiple debts. Merging them makes it more convenient as you only have one lender. However, consider whether you can afford to keep up with the repayments, as not doing so can make your credit score plummet. What’s more, if you have a secured loan, your assets - such as your home - could be at risk if you default on a repayment plan.’

Use A Credit Score Tool

Being signed up with one or more credit score tools helps to provide an overview of your financial situation, along with tips on how to improve. Lee Watkiss said: ‘Sign up to a credit agency and have a look at why the score is poor. This gives you a much better idea of where to start.’

The question of which services to use doesn’t have a clear answer. There are plenty of good options out there, and people will have different opinions based on their own experiences. Amy Louise said: ‘If you sign up to ClearScore, it will tell you your credit score when you log in. It also tells you how and where it needs improving, it’s 100% free as well.’ Sonal Jethwa agreed: ‘I use Credit Score and they’re amazing, I have bad credit and over the years it’s improved. It has taken me a couple of years but I’m getting there.’

Meanwhile, Susan Jones has two go-to services: ‘Experian or Credit Karma both offer a free service. With Credit Karma you can see a bit more detail but it’s not as accurate as Experian.’

Be Smart With Your Money

Whether you’re paying off debts or borrowing smartly to help with your credit score, it’s important to be smart about how you’re spending. Budgeting can be easy if you set up some rules for yourself - and plenty of people have tips to provide.

Chris Willacy recommended not letting repayments get on top of you: ‘An obvious one, but pay your bills on time, every time.’ Another approach is timing your payments. Alison Ronald suggested: ‘Pay weekly for water bills etc.’ It’s also important to stay on top of interest. Sam Townley advised: ‘Make payments early and ensure it’s always the full amount. Never let interest accrue.’ Jenni Paton spoke from experience: ‘I used to have a bad score. You just need to pay things off and keep control of your finances for a few years until it builds back up.’

While you’re facing your finances, get your priorities straight. Dale Hyslop said: ‘Sit down with all your bills and be honest. If you have loans with a high percentage then get after them first. If you have debt but savings then get the debts paid ASAP. They are costing more than anything you’re making on your savings.’ Gary Kittle agreed that being honest with yourself is essential: ‘Ask yourself ‘Do I really need this, rather than want it?’ when using a credit card.’

Jordan Davies had a number of tips: ‘It’s not just about rebuilding your credit score - it’s learning how not to get into debt in the first place. You need to watch your spending habits. If you’re constantly spending too much then set up transaction limits on your cards or transfer what you need to spend on bills and groceries to another account and make the bills come out of there.

‘Know your limits - if you know you can’t trust yourself with a credit card then don’t go for one. You can build your credit by paying for internet, mobile phone and other bills as it shows you’re paying to a lender.’

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