There are many occasions when one might need to borrow some money. Perhaps you need a new car, or household appliances or furniture? Or maybe you need a holiday? Then there’s the mortgage for that house you’ve set your heart on. All these require you apply for a loan or a credit card, but what if your credit score is not up to scratch?
It could be that you have a history of missed payments – it happens to us all when we fall into times of trouble – and your score has been reduced because of that? In the article that follows we are going to explain why opening new lines of credit might actually help you get a better score. We recommend you have a look at this YouTube video, then let’s begin by talking about what your credit score is and why it is important.
What is a Credit Score?
It is a curios fact that many people who have never taken out credit of any kind may be rejected by potential lenders. This is because they do not have a credit score. Your credit score or rating is based on past borrowing history as well as personal financial circumstances and employment status. It is automatically adjusted over time as you take out credit.
The credit agencies will look at how your repayments are made, whether you keep up to date with them, and how much debt you have compared to your income and borrowing allowances. So, how can taking out more credit affect your score? That’s what we want to talk about next.
Why Will New Lines of Credit Affect My Score?
It may sound contradictory but taking out more lines of credit will boost your credit score if you do the right thing. Here’s what we suggest: apply for a credit card. Even if you have poor credit, you should still be able to find a card for which you will be accepted. Once you have your card, be sure to use it. Don’t stick to small purchases either.
For example, if you want to buy a household appliance or book a holiday, use your new card for that. Then, pay the balance off as soon as you can with the funds you would normally have used to make the purchase. The key to improving your score lies in keeping up with repayments, making them on time, and paying back more than the minimum amount every month.
Keep up To Date
The key, as we said, is to keep up to date with your repayments. The best position to be in to keep your score favourable is to have debt that is 25% or lower of the maximum amount on your card. Repay more than the minimum each month and make regular purchases which you repay on or before the due date.
A poor credit score can be repaired in this way but be aware it may take some time. Start applying now and use your new lines of credit to improve your score.