Improving bad credit rating

Willis66

Hi

Got myself into a bit of financial difficulty, payday loans, credit card and a bank loan, started struggling because I got myself into the neverending loop of payday loans, come clean to my folks and they have taken out a loan for me in their name to pay off debts and Im paying it each month.

I did appy for a loan a few month back but got declined, I had missed a few payments on my credit card but everything else has been paid on time. Now in the next few years I am looking at building up my credit rating to something decent as thinking for the future, mortgage etc..

I'm not sure if this is the right forum for it but if somebody can put me in the right direction that would be great!

Willis66

Bump.........

gargrave50

Hi

Welcome to DFW. Why did you apply for a loan a few months ago if you are already repaying debts which got you into a bit of a mess?

You need to clear your debts, which is the first step to rebuilding your credit history. Once you are well underway with that, try applying for a bad credit card like Capital One. Spend a small amount on it each month, BUT ensure you have a direct debit set up to pay the balance in full each month. This should help ensure your credit history is on the mend.

No more borrowing in the meantime.

Willis66

I tried applying for a loan to consolidate my debts. All my debts are now clear due to the loan my parents taking out a loan for me in my dads name. So at present I have no debts.

Think I will look into these cards, maybe spend £30 a month on the card but pay it off by DD each month?

FinancialBlogger

Here's a radical concept. Forget about your credit score, you don't need one. Make a plan to get out of debt, work the plan until you're done and your credit score will go to zero.

Sounds crazy I know. But when you have no debt you don't get yourself overextended financially and you're not spending thousands extra every year on interest, fees, and such.

You can still do anything without a credit score that you can do with one like buy a house, car, or anything else.

rising_from_the_ashes

Willis66 wrote: »

So at present I have no debts.

Errrrr apart from the one that you now owe your parents!

TBH consolidation is rarely the best way to go as you often end up paying loads more interest and it doesn't necessarily address the reasons why the debts occurred in the first place (which I hope you've now done) so it's really easy to run them up again.

If you still have a cc and you are absolutely sure you'll not run up more than you can clear each month, then putting something like your fuel or groceries on it and clearing each month can be a good place to start rebuilding your credit rating.

paulmapp8306

You will need a credit score at some point - for many things other than credit believe it or not, however dont worry about the "score" on credit reference agencies sites - they mean nothing (creditors generate their own score). It s the history that needs cleaning up rather than the score being built up as such.

1. Get copies of your credit files.

2. Any shown as "AG" or "missed payments (numbers) try to pay off ASAP.

3. Any shown as default - you have no control over, only time will help, so pay less towards those IF it means you can clear the others quicker.

4. Try making Full and Final offers on any debts that arent already defaulted (from as little as 10%) as and whan you can afford them - starting with the smallest debts.

5. Apply for ONE credit building card. Use it to buy food - and clear it every month JUST BEFORE the billing date (so they dont add protection payments which are normally conditions of those cards).

6. After a year or so, try getting a Credit Card that pays cashback (Santander do one). You then put ANYTHING that generates cashback on that card - and EVERYTHING else on the credit building card. Again clear both cards monthly (or more often - I clear every 2 weeks on the cashback card so I always have spare funds - for more cashback).

Once the defaults drop off (after 6 years) and you get the AG/missed payments either clear or back on schedule - the cards will have helped build your credit history back up.

*note of caution - if you do the credit card thing - you MUST be disciplined. If you spend £50 on food, you MUST have £50 in the bank to cover it. Do NOT rely on next months pay to cover the CC, and dont "overshop" as its on a card. Just treat it as cash. Its worth getting a spreadsheet knocked up that you put your spends on - and also whats in your bank. Set it up to autocalculate whats left. When you have shopped, put the bill in the "spend" column and it will show what you "OULD have left in your bank had you spent cash - that way you dont loose track later int he month.

Willis66

Just to clarify again, I have no more current debts under my name as my parents paid this off, so the only debt I have is paying the monthly loan fee to my parents which turned out to be cheaper than what I was paying for my credit card and loan.

Seems the best option is slowly but surely building it back up, the loan that has been taken out is 3 years so in an ideal world I'd like to have built up a decent credit score again.

Thanks for that Paul, some great advice there!

camuk81

Wills I think you need to take a step back and get your £2 file from all the companies just to check you haven't missed anything.

As regards credit it takes time. Other then that follow the basic rules. Don't go over an overdraft, be on the electoral roll at your current address

Willis66

Well actually I do still have an overdraft, will clearing this improve my credit? Its £400, i've never been over it

Gordon_Hose

The only thing you can do to improve your credit rating is to pay all your bills on time, build up all those green marks, until all the missed payments etc drop off in 6 years time.

There is no quick fix solution.