Squeaky Clean: How to Clean Your Bad Credit

Bad credit can stop you from getting on in life, significantly reducing the amount of financial products that are available to you. You’re always going to get a better deal when the lender or financial services company trusts your ability to repay them, which is measured based on your credit score. Unfortunately, there’s no such thing as a no credit check loan, so your credit score needs to be in good shape for you to take out a loan for any purpose.

Having a low credit score can befall anyone through unfortunate circumstances, so it isn’t anything to be ashamed of. In fact, young people tend to have a low credit score simply because they’re too young to have a longstanding repayment track record.

There are ways to get out of this quandary and back onto a financial sure footing, and we’re sharing some best practice tips today to help you do just that.

Make sure everything is in order

Start by requesting your credit record from a credit agency, and make sure all the information on there is correct. Even a small inaccuracy like an incorrect address can mean a lower score than you should have.

You should also make sure that you haven’t been defrauded in any way, so double-check that you recognise everything on your credit report before proceeding with any credit building techniques.

Know what lenders like

Building credit can be as simple as paying off your phone or internet bills on a monthly basis, as this shows a solid track record of regular and prompt payment. Lenders also feel more comfortable when a prospective customer has a settled address and isn’t moving around constantly.

In addition, you should also try as hard as you can to eliminate existing debts – have a think about utilising budgeting tools and maybe even consider a debt consolidation loan to help you get on top of your expenses and outstanding debts.

Avoid scams

If it seems too good to be true, it probably is. There are a large number of unscrupulous companies that claim to repair your credit for you, but often all they’ll do is charge you to acquire your credit file – something you can do yourself for free.

To put it in simple terms, don’t even consider using one of these firms and make sure you’re aware of scams at all times.

Consider a credit card

Credit cards designed for rebuilding credit could be the option for you if you’re looking to boost your score relatively quickly. These cards often come with a stringent credit limit and the interest rates can be as high as 30% – think of this as a reflection of how much your lender trusts you. If you have a squeaky clean track record of using one of these cards and paying off your bills regularly, your credit score will improve – slowly.

If you have a squeaky clean track record of using one of these cards and paying off your bills regularly, your credit score will improve – slowly.

However, using these cards risks plunging you into further debt if you don’t keep up with payments – worsening the credit score you set out to improve. So, it pays to be prudent and aware of what you’re spending money on – which is an evergreen personal finance tip, but especially useful if you find yourself in a bad credit situation.

Biding your time and building up your credit can result in a better deal if you compare it to taking out one of the many bad credit loans on the market – secured loans for customers with better credit typically have far more agreeable payment schedules and interest rates.

So, if you keep all of these tips at front of mind and exercise some financial caution, you’ll be well on your way to the sunlit uplands of an unblemished credit score.

Man's wallet with credit card