‘How I Wrecked My Credit Score’

It has been a few years since I was obsessing over boosting my credit score after I managed to completely wreck my then pretty good credit rating by taking out an overdraft that I couldn’t pay back and then incurring additional daily bank fees up to £5 a day. On top of that, I had failed to keep up with my phone contract monthly bills and was ordered to pay the full balance up front otherwise I would be preparing to go to court.

Almost 5 years on I cannot take a T-Mobile phone contract out and I also vowed to never buy a phone on contract again. Now looking back, it’s quite alarming how much I didn’t realise the importance of maintaining a good credit rating and how some of my mistakes could wreck my credit rating for a very long time. The situation was made worse when I found out a bad credit rating can take up to 7 years to clear.

As 2016 begun, I made it one of my new year’s resolutions to ensure that my credit rating improved. As the months went on I decided to check my credit rating on Experian and Noddle. It’s good to note that all credit rating agencies have a different rating spectrum. You can look at one and you may be rated 500/1000 and when you check another credit rating it may be 615/1000, which, is quite a difference.

Related Post: What To Consider With Credit Cards

When I was younger I thought in order to attain a good credit rating I had to have a lot of savings or come from a wealthy background. A credit rating report’s purpose is to show how good an individual is at paying back their debts/credits. This could be your mortgage, Netflix payment, electricity bill etc. Regardless of whether you have savings in your bank account or not, that is not what a credit rating report is looking to access. They just want to know if you are good at keeping up to date with your payments. Your student loan isn’t even listed on there.

I decided to get a credit card in March 2016. My credit rating at this stage (using Noodle) was rated just between poor and fair. I knew that I had to apply for a credit card with a high APR because if you apply for a credit card and your application gets rejected, it will be noted on your credit report. I ended up going for the plunge and applying for a credit card with 39.9% APR. Although this is a particularly high APR, I was determined to show that I could repay everything on credit back on time. Doing this means you pay less interest that is great for you but not preferred by your credit card provider.

Paying all my balance in full has taken my credit score value from fair to good and according to Noodle, I have now reached the average credit rating for my borough and I am only 3 points away from the average credit rating in the UK. I really didn’t expect such a change for the better in my rating in such a short space of time.

Related Post: 5 Things That Affect Your Credit 

My next steps will be to pay off my total outstanding balance and perhaps just before the New Year I will apply for another credit card with a lower APR. Here are some tips for anyone looking for credit score guidance:

  1. Check your credit rating. This can be done through Equifax, Experience or Noodle.
  2. Compare your credit score from one credit agency to another.
  3. Commit to paying the full outstanding amount each month otherwise you could then incur further monetary issues.
  4. Once you have your credit card you should create a budget listing how much you can afford to pay back monthly on your credit card and stick to it. If your budget is low for one month keep your credit card at home to stop temptation creeping to spend on it when you are out.
  5. Lastly, check your credit score each month around the same day and keep track of how your credit report is changing.

 

If you have a money story you’d like to share, please email founder@refinedcurrency.co.uk

This post was written by Denise


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