If there is one thing that we all know about life as an adult in this day and age, it’s that everything revolves around your credit score. From sorting out a house for your family to live in (both rented and owned) to getting a mobile phone, everything is based upon your credit score. It’s actually really horrible. If you’ve ever had issues with repayments, for any reason, it’ll affect your score.
And that, in turn, will affect what you’ll be able to buy. For example, is your car a rust bucket that you don’t want to take your kids in? Well, if you want to get a new (or approved used) car on finance, because they’re so expensive, your credit score better be “good” at least… Otherwise, you won’t be able to get that car, instead having to make do with whatever low priced second-hand vehicle you can get your hands on.
This was pretty much how it was for me. I had a car that I didn’t feel safe taking my wife and daughter in, so I knew I had to do something. My credit score at the time was “poor”, so I couldn’t get a good replacement. Thus, I made the decision to rebuilt my credit score.
Aside from making sure you’re on the electoral roll at your current property, there’s a couple of things you need to do to get started. One of the first things that I realised was that, without having credit to pay back successfully, I had no way to get my credit score to improve. So, the first thing I did was get one of those “poor credit cards”. It had a limit of just £100, which is obviously really low. However, it also meant that it was easy to pay off, but I couldn’t get the debt too high. I would go and do my weekly shopping with it, and then pay it off as soon as I got home.
I had the money to do my shopping without it, but by using it and paying it off weekly, I was proving that I clear my debt. That is really important!
There are two ways that you can do this to begin with. One is to get one of those credit cards, whilst the other is to get one of the many small loans that you are absolutely sure you can repay. For example, if you have savings of £250 that you were planning on buying a fridge for, then get a loan of £250 to buy the fridge. Then, use the savings to make the repayments (but don’t pay it off early). This way, you are making your regular payments, which will help to boost your credit score.
The Next Step
Okay, so once you’ve gotten things moving in the right direction, however you manage to do it, you can move on to the next step. This involves getting something more mid-term. Basically, I started by signing up to a contract for a mobile phone. You won’t be able to get the latest iPhone or Samsung Galaxy, but if you go for a really cheap handset (and I mean a real budget handset), you’ll probably be accepted. This will give you a mid-term credit agreement at an easy to afford rate.
Then, as long as you can afford to add the extra repayments, look at buying a piece of furniture or some white goods on finance as well, from the finance company your preferred shop generally uses. These will typically be over 12 to 24 months, and as long as you can afford it, will add another mid-term finance agreement to your credit history.
Work hard on paying off the phone contract and any finance you take out, making each of the monthly payments. However, again, don’t pay it off early; the longest you are successfully paying each direct debit, the more it will improve your credit score!
I took out two phone contracts (one for my wife and one for myself), as well as buying a fridge, washing, sofa and bed all on finance over the course of 3 years. And yeah, it isn’t a quick process to truly rebuild your credit score, but I went from “poor” to “excellent” in 4 years! So make sure you pay each direct debit, and finish paying off every finance agreement! It will really go a long way.
Moving To Long Term Credit
Once you’ve successfully paid off 3 or 4 mid-term finance agreements, you’ll already be in a much better position than before you started. So then next step is to apply for long term finance on something. In our case, it was an approved used car. Now, for some of these long term agreements, you’ll need to put a deposit down, so be ready for that.
However, once you’ve been approved for whatever it is you are buying, you’ll have that long term agreement appear on your credit history. So, as with all of the other steps, make sure that you meet every direct debit. These are typically going to be more expensive that the mid-term finance agreements from before, so try and stick with just one at a time. This way, you won’t get yourself in over your head, and you’ll be able to make the repayments on time without issue.
This will mean that, over a long period of time, you are paying off more expensive credit, which will really help to boost your score much faster! Just make sure you don’t miss a repayment!
And That’s All Folks
It will take a long time, but by following these tips, you’ll be able to build up your credit score to the point where it doesn’t hold you back from providing for your family anymore. And let me tell you, that’s a really great feeling! Trust me, I’ve been through it.
Do you have any tips for helping to build your credit score back up? If so, then why not share them in the comments below?