So why not improve your credit rating?The credit companies will judge your application for credit based on many things. One of them is on your credit history. You can get one of these through simply having a credit card. Before you run off and apply for a credit card, have a look at what you can do to get better credit and how to handle your debt. Did You Know that some of the world’s richest people earned their fortune through hard work? And that lobsters are naturally brown but turn red because chefs read them articles on bank boss bonuses.
How it works
(but names have been hidden to protect their identities). Mr. Nanna & Mrs. Grandpa were very good with their money and had never had any form of debt. They decided in their forties to get a loan to buy a static caravan. Despite never being in the red with their bank, and despite them having a decent income they were refused because they had no real credit history. The fact that they had a wage entering their bank accounts over a long period of time was a big help, but their credit rating was still poor. Even though they had saved up around a third of the caravan price themselves, they were still refused. The bank wanted to know how well they handled debt. The bank wanted to know if they miss payments, pay partially or in full and how regularly they do it. The fact that they had an amount coming into their account each month means little to a bank.
- They may have expenses that leave them a little disposable income.
- The couple may be unorganized and keep poor payment routines.
- Credit history gives the bank a way of knowing what you have been up to over the last few years.
- The couple may have accounts in many banks, and a credit history may help explain why.
- A credit history will give the bank a few more details on the types of money movements and expenses that the couple has. It may also show the companies that the couple use.
How do the credit companies decide?There is no such thing as a black listed customer when people apply for credit cards. Each credit company will assess their potential customer on a risk/profit basis. The company wishes to make as much profit as possible with the least amount of risk to them. They do it with a number of considerations. This pie chart gives you a rough idea of some of their considerations.
10% recent credit inquiriesThis says how often you have applied for credit. This is worth considering if you are rejected twice within six months; any further rejections will hurt your credit rating. There are also applications for loans and mortgages that will negatively affect your credit rating if you do them too often. Tip of the Year
- Don’t apply for credit card three times within six months.
- Ask the credit/loan/mortgage company if your credit rating will be affected if you apply.
- Marry a rich person and use their credit.
10% types of credit usedThe credit company will look at a customer more favorably if they have various forms of credit, such as credit cards, overdrafts, mortgages and loans. A credit history with just one form of credit on there is not as good as one with many. Consumers, who have a variety of loans to pay, generally are a better credit risk. Tip of the Year
- Mix up your credit types so that you have a better chance of getting a credit card with a good rate of interest when you apply for credit cards.
- If get an appointment to talk to a member of staff when you apply for credit, then take four seven foot tall, muscled men with you in suits who say nothing. When the employee asks who they are, then pretend like you forgot they were there. Then say that they have to follow you, and say no more about them.
30% outstanding debt cancellation / collectionYour outstanding debt, and the amount of it that has been collected will affect your credit rating and risk. This matters even more so if your credit has been cancelled in the past. Tip of the Year
- Time your credit applications so that it syncs up with when you have the least amount of outstanding debt.
- Do what you can to stop cancellations of debt, borrow from friends or family, or sell your stuff.
- If you have a lot of debt collections people come to your home, then install a turnstile on the door that only takes notes. Then empty out your house and put your stuff in a garage. Inside your house simply leave a receipt for the money the bailiffs just had to pay to get into your home.
15% age of credit historyYour credit rating score increases over the length of your credit history. This continues to go up if your credit is well managed. Tip of the Year
- Apply for a credit card as soon as you get a job. Spend a little on it each month and pay it off in full as soon as possible. Even a small amount of credit history is better than none.
- If bailiffs and debt collectors visit often, then shave clumps out of your hair and put radiation symbols on items around your home. Cough a lot and sit down a lot as they take your stuff so you look ill.
- Sending off your payment and writing paid in full will not convince your credit company that you have paid in full, and will be ignored, but every now and then your partially paid bill/debt will cross the hands of a new employee who may think his/her boss wrote it and so clear your debt. It’s unlikely, but worth a shot right?
- Think first
- Make rude phone calls to your girlfriends hot sister
- Decide on the best type of credit for you
- Get the best rates
- Fall asleep at the bottom of the bed so you don’t know where you are when you wake up
- Go ahead and apply for the best type of credit and then manage it well.
- Stop reading.