The causes of a bad credit rating are no mystery, it’s often down to those debts and unpaid bills. There’s no magic formula for fixing it either but by following these five simple steps to control that debt, you could get the healthy and sustainable credit rating that’s the cornerstone of everything from big-ticket purchases to starting your own business.
1.   Don’t have various debts spread over numerous cards.
Just because credit card companies offer you the opportunity to live beyond your means, doesn’t make it a good idea. Cut down the number of cards you have. Prioritise the card with the highest interest rate and pay it off first. Where possible, switch your balance to a credit card that charges a lower rate of interest. Use your cards less too, by making more cash payments.
2.   Stop the late payments.
Paying your bills on time, every time, can greatly improve your credit rating. Late payments show upon your credit report and result in higher interest rates and late fees. Set up a direct debit to come off at the beginning of the month so you don’t fritter your wages away before you’ve paid off the cards.
3.   Consolidate your monthly debt.
A secured, debt consolidation loan could be an effective way for homeowners to borrow money at an affordable rate and reduce their outgoings into one monthly payment. This allows you to plan your repayment schedule with confidence. The repayment period can sometimes be more flexible and over a longer period than with an unsecured loan. For more information or advice, talk to a debt management specialist.
4.   Make more than the minimum payment.
Paying more than the minimum can be a critical step in reaching your repayment goals. This is particularly true of credit card repayment, though it may also be useful for paying off other loans, such as those used to purchase big-ticket items.
5.   Monitor your credit rating.
You should check your file regularly to ensure the information held is correct. Under the Data Protection Act, credit reference agencies must provide you with a “Statutory Credit Report” for a fixed fee of £2. You need to provide them with your full name, date of birth, current address and any former addresses for the previous six years.
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