Although it might sound a little bit strange, making yourself more attractive to lenders is incredibly important when it comes to getting approved for any type of credit, such as a mortgage or a credit card. Attractiveness is all about making your credit report, and your credit score, more attractive – despite any of the nasty details that may be lurking in your financial past, such as defaults, county court judgements or missed credit payments. Read on to find out exactly how to make yourself more attractive to lenders.
Stop Applying for Credit
Although there’s nothing wrong with applying for credit if you actually need it, if you get declined for a credit card and find yourself applying to half a dozen more over the following week, you could seriously inhibit your ability to get credit. Putting in multiple applications, and getting declined, will make potential lenders think that you are desperate – think about it, would you lend money to someone that desperate? No! Space out your credit applications and if you’re thinking of applying for something big, like a mortgage, do not apply for anything at all for at least six months before filing your mortgage application. And if a credit card company declines your application, they probably have a good reason for doing so. If you know that you’re unlikely to get accepted for credit, or if you think you may have a problem, apply for a credit card designed for people with poor or low credit.
It’s All About Profit
For the most part, getting credit is all about profit – how much of a profit you’d make for the lender. Profit comes from interest rates, which are applied when you don’t pay back all of your credit before your interest-free period ends, or in the case of credit cards, which is applied if you do not pay back the balance in full at the end of each month. Although this is the best way to manage your debt, if you’re unlikely to make any profit, the lender might not give you any money! Risk does play a part because lenders would be bankrupt if everyone paid their bills on time – but it is worth considering that you can have a credit report that is so good, lenders might not lend.
Check Your Reports
There are a number of credit report agencies and if there are details that are different or inaccurate across any of those reports, you could get rejected for something as small as a mobile phone contract. Check all of your reports meticulously and take note of all of your previous addresses and phone numbers. If there are any active contracts still on your files that you aren’t actually using, get them removed from your file. Check any incorrect mobile phone numbers and ensure that your job description is exactly the same across all reports because this might also lead to rejections. And if there is anything in any of your reports that you think shouldn’t be there, write to the credit report agency and get them to correct it. If they are unwilling to correct it, add a ‘notice of correction’ to the report to add your side of the story. This is a good thing to do if you’ve had a default or a county court judgement, as it allows potential lenders to get your side of the story. Never, ever, ever pay a credit repair agency to repair your credit report for you. You can do all of this work on your own!
Stability is really important when it comes to applying for credit. Lenders want to know that you’re likely to stick at the same address, so put down a home telephone number as well as a mobile telephone number if you can, and try not to move around too often from house to house. Ideally, stay at the same address for more than three years. Multiple addresses within three years can make you look flighty, so if you can – and we know this will be difficult if you’re a student – stay in the same place as much as you can.
Close Old Credit Accounts
If you have any open credit accounts, such as old credit cards that you no longer use, old store cards that you no longer use or even a mobile phone contract that is still open, despite you paying off the balance, you could be seen as a fraud risk. Take a look through your purse and instead of just cutting up your old credit cards, call the companies and get them to cancel your account. Shut all of your old accounts and get rid of the store cards – you don’t need them. If you can’t afford to buy your shopping whilst you’re in store, you can’t afford to buy it full stop – so when the assistant behind the counter asks you whether or not you’d like a store card, just say no!
They Might Not Score You in the Way That You’d Think
Banks could well score you based on whether or not you’d be a profitable mortgage customer in the future, rather than on whether or not you are suitable for a current account – even though you’re only applying for a current account and even if you have absolutely no intentions of applying for a mortgage. Think about how the lender might score you before applying as it could make a big difference in whether you get accepted for credit or not.
Above all, you have to make very sensible credit choices. If you need to get credit, you need to be sensible. Don’t be desperate, space out any applications and above all, do not apply for credit that you don’t need. Come back next week to take a look at more top tips for making yourself more attractive to potential lenders.