Loans have become a popular commodity not only in the UK but anywhere in the world. When people are short of cash, they turn to short term loan lenders. These loans are usually in small amounts, from £100 to a few thousand. One reason why this type of loan is popular is the ease of getting one. You can apply for a loan today and get the funds a few hours after submitting your application.
In most cases, you do not have to visit the lender’s office. You apply online and get the funds online. However, some lenders may conduct a credit check on you before they approve your loan. Having good credit would lead to a quick approval and release of your loan, while a bad credit history may result in the rejection of the loan application. For borrowers, having an excellent credit score or rating is very important for a successful loan application.
Ways of Keeping Good to Excellent Credit
When you use a credit card, open a bank account, or buy something on credit, credit reference bureaus stat to monitor your credit behaviour. Some people think that having no debt at all and purchase cash all the time can result in an outstanding credit rating. Only a few are aware that to build a credit history, one must establish a credit record that is good to excellent. In the UK, there are credit reference bureaus that keep a record of peoples borrowing habits. These are TransUnion, Experian, and Equifax. These agencies work with banks and other financial institutions, credit card companies, building societies, mobile phone companies, and other retailers.
Whenever you have credit transactions with these business entities, these agencies would start monitoring your borrowing habits. A credit score of 721 to 880 will give you a fair credit rating while a score of 881 to 960 has good rating. A good credit score will open the door of all lending institutions for you.
Here are the best ways to maintain a good credit rating.
Always Pay Your Debts on Time
Paying your debts before or on the due date will do wonders to your credit rating. The credit reference bureaus keep a record of your payments. You might think those small debts do not matter, but they do. Avoid neglecting to pay small debts and utility bills, big or small.
Keep Credit Card Balances Low
Many credit cardholders use their cards to the maximum, but this habit can hurt your credit rating. If you have a credit limit of £5000, spend only a maximum of 30% or lower. Maintaining a low balance will show credit card companies that you know how to manage your money. You can expect a good credit rating from them.
Have Few Credit Accounts
Credit cards are helpful if you happen to run out of cash. However, use them sparingly. Having several credit accounts and using them to a maximum level would show your spending habits. It is fun to shop when you have thousands on your credit account. Nevertheless, this can tempt you to spend more than what you can afford at the moment. Before you know, your debts have accumulated to a point where you can hardly pay your bills on time. Your credit score would plunge and you will have difficulty building it again.
Watch Out for Errors in Your Credit Report
You can easily access the websites of credit reference bureaus. Regularly monitor the entries in your credit record. A small debt that you have already settled, but were not yet marked as paid can negatively affect your credit score. Once you see the error, you can dispute it and ask for correction.