It can be tempting to think that lenders do mind too much about your credit score. We hear that lenders are lending out lots of money so might think that they will be happy to lend to anyone. We may also hear that some lenders like it when a person misses a repayment because they are then able to charge them more money. However, you need to be very careful what you believe.
What Lenders Look for
Lenders might be looking for different things when they are looking at your credit report. There is not one model credit report they use as reference, they don’t have a scoring system and give you marks for different things, they all look out for different factors. This makes it pretty hard to know precisely what to do, but there are some things that they will dislike seeing. They will not want to see that you have recently been turned down for a loan because that might make them think that there is reason for them to turn you down and so they might turn you down really quickly, without even looking carefully at your report.
Another thing that will be off putting for them will be if you have applied for lots of loans recently. They will see that as an indication that you are struggling for money a lot and they might feel that indicates that you are not managing your money well and they therefore might feel you wont be able to repay them if they do lend to you. They might also feel that if you already have a lot of loans, you might struggle to repay theirs as you have some many other financial commitments.
They will want to see evidence that you are making regular payments, even if you have a bad credit record. This might be loan repayments or it could be bill repayments, contracts or even insurance. They will like it if you are making these payments each month because it will show that you are capable of being organised with your money and are more likely to be able to repay them.
What to do
The first thing to do is to take a look at your credit report which you can do for free. Then you need to carefully examine it and make sure it is correct. Sometimes lenders will not report when you have repaid a loan, for example, so you will want to make sure that this has been done and that everything else is correct. Then look at it and see whether there is evidence of you making regular payments or repayments. If there is not, some people will automatically think that they should take out a loan to prove they can repay it. This is not a wise move though as it is risky and if you cannot repay it your credit report will look worse and it will cost you money. It is much better to have your name put on some utility bills or things like this. Make sure that if it is a bill that someone else pays, that it always gets paid on time, or else it could actually make your credit report look worse.
If you have lots of loans, or have missed payments or repayments in the past then you cannot undo what has gone before. However, if you make sure that form no on, payments are made on time, then this will start to improve things. It could even be better to work on repaying some of those loans. This can impress potential lenders as they will see that you are capable of being responsible and prioritising your spending.