Understanding your credit score and how to improve it
Everyone has a credit score but not everyone knows what theirs is. More importantly, credit ratings can tip the balance when applying for business funding. Nowadays, you can easily access your credit file for free online and get an up to date indication to where you stand compared to the national average score (which varies based on which company ratings you are using). In this post, we explore quick ways to ensure you always have a good credit rating to enable you to gain access to the best available deals.
- “I don’t have bad credit if I’ve never used credit”
One of the most important things to remember is that “no credit” does not equal “good credit”. Credit scores do not start at “Good” and go down or up depending on your activity — a thin credit file (with no to very little credit history) will not be considered as the safest option to lenders or companies analysing your credit history, simply because there is no evidence on which to base their risk assessment.
- Register to vote
Your credit file does not give away your political interest, but appearing on the electoral roll at your current address will mean that lenders will be able to check your name and address against it when performing their credit search. If you are not registered, being approved for credit may be more difficult and you may be asked for supporting documentation before being able to proceed such as a driving licence and proof of address to pass certain fraud checks.
- Pay on time
Your credit score can suffer badly from any missed or late payments. In a lot of cases, a late payment falls down not to a financial situation but a lack of organisation. Most bank accounts now offer the possibility to schedule payments in advance, but you can also set up a Direct Debit for recurring payments, create calendar alerts for due dates or reminders.
- Ask for a payment plan
In some unfortunate cases, late payments are caused by a shortage of cashflow. You should always borrow responsibly, but unexpected situations can mean that your plans fall through. If this happens, do not bury your head in the sand hoping it will disappear as it could create some long-term difficulties for you and your business. Be proactive and contact the companies you owe money to. If you explain your situation and propose a payment plan you know you can realistically follow to repay your debt in full, you could avoid having your account defaulted.
- Check your credit file regularly
You can now access your credit file for free online via a few companies such as Noddle and Experian. Developing the habit to regularly check it will give you details on your credit-building progress, an accurate score and will also enable you to spot potentially erroneous data. If you see an error on your credit file you should contact the credit reporting company to dispute it — the company will investigate and remove the error if the investigation is successful. Ensure that all credit items are reported against your current address to prevent errors.
- Request a “quotation search” whenever available
Capital on Tap performs a soft quotation search on your credit file when assessing your application. This means that it is only visible to you, and does not create a footprint on your file for other lenders to see. Applying to multiple sources of credit at once sends out the wrong message to companies assessing your credit file as it may look like you desperately need extra cash advances, making you a higher risk customer than the norm.
Remember: checking your eligibility with Capital on Tap does not affect your credit score. Apply now and grow your business today!