Taking Out Credit Might Enhance Your Credit Rating

Your credit score is an indicator to future building societies of how you have handled credit extended to you in the past. If you have behaved with credit then they know from history that you are more impending to repay it. Similarly, if you have misbehaved then you are more impending to do so again in the future. That’s the idea of the credit score.

So why could applying for more credit help several people to improve their score, an action that could allow them access to larger loans and lower interest rates than they otherwise would have received?

There is a clear group who could benefit from more credit
Well there is a clearly defined group of people who this should work for. If you credit score shows how you have handled loans in the past, then not having had a loan will prevent you having a score. So, by taking out some form of credit you can demonstrate you are reliable.

If you have never had any form of a loan then you can apply for a credit card and used properly, this might only improve your score. But it has to be used properly! You are showing the future lender that you can be trusted with cash and here is where you set your example.

Apply for a free credit card
First, be certain that that you apply for a fee free credit card. Several cards will charge you a dormancy if you never use it, avoid these.

Then, when the card arrives cut it up. That’s right, chop it in half so that you cannot use it. Do not tell the credit card company that you have done this as they will then cancel the card, which is not what you want. But by having an unused credit card they will keep sending you monthly statements showing that you owe nothing. Since you ow nothing, the repayments are zero and when they update your credit report they will show other banks that you have access to credit and that you are up to date with repayments and have never missed a payment.

Is it always a perfect idea?
That is the perfect credit rating! Only by applying for a credit card and never using it you can improve your score. However, it could go wrong. If you do not cut up the card and start omitted repayments then you could slip into debt and start to destroy your credit score, that is why it is important to be careful. If you are not the kind of person that can be trusted to not use the credit card then this idea is not for you.

Does it sound like a daft idea to you or a good idea? Let me know by leaving a comment, especially if you have tried the idea!

Written by Keith Lunt of compare bank mortgage rates. If you want to know more about how to compare mortgage rates online, call in!

Bloggers that are searching Internet for info about the niche of grant proposal examples, then please make sure to check out the link that is quoted right in this paragraph.

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