Why Should You Improve Your Credit Score?
Having a higher credit score means lenders will see you as a lower risk and therefore you are more likely to be approved for credit.
- Better chance of being approved for credit cards, mortgage and loans. As you have a higher credit rating you could also have more options available to you which, could help you save money.
- Lower interest rates.
- Higher credit limits.
- Better car insurance rates if you pay for your car insurance as a monthly direct debit.
How To Improve Your Credit Rating
Begin by proving where you live, you can do this by registering on the electoral roll.
Build your credit history, not having much or any credit history can make it hard for lenders to assess you and your credit score could be lower because of this. This is common to happen amongst younger people, there are ways to build your credit history that will be covered later on.
Making regular payments on time and in full every month will show lenders you are reliable and able to use credit responsibly. Holding good credit even if it’s on old accounts that are well managed will also usually improve your score.
With credit you already hold try to keep your credit utilisation as low as possible, a lower percentage is advantageous and will make you look better to lenders, your credit score could increase as a result of this. Try to keep it below 30%, for example if your credit limit is £1,500 and you have used £500 of it, your credit utilisation is 33%.
Check your financial links to other people, if they have bad credit this could reflect badly on you.
Check if you can get a boost, some credit reporting companies can boost data that reflects well on you, like examples of you paying your bills on time etc..
Check & report mistakes on your credit report, check that all the information and spelling on your credit report is right as even something like this could affect your chances of being accepted for credit and could result in a lower credit score. If you do see a mistake, report it directly with the provider. If you would rather someone else handle this for you, contact a financial advisor to raise a dispute on your behalf. If there is negative information on your report that is correct but from a special circumstance like during a time you were in hospital for example, you can talk to the credit reporting company and explain this.
Monitor your credit file and check for fraudulent activity. If you see anything that doesn’t look right contact the fraud team of the card provider.
Avoid moving home too often, this can look unstable and could make lenders think there’s an affordability issue to do with rent.
Consider getting a credit builder card, this type of card can help you build credit if you have none yet. Initially a credit card could cause your score to go down but with time if you use the card right it can help build your score. These cards work particularly well when you use them for essentials that you were going to buy already like fuel for your car and then repay the card on time and in full.
How to keep your score healthy
Limit credit applications, making too many applications during a short amount of time can look bad on your credit file as it can make lenders think you rely on credit. Each application for credit records a hard search which companies will see whilst doing a credit check on you.
Avoid defaulted accounts, these accounts are usually caused by missing several expected payments and your relationship breaking down with the company as a result of this, these accounts can have a considerable impact on your credit score.
Only borrow what you can afford and keep an eye out for fraudulent activity on your account.
How lenders calculate your credit score
You don’t have an overall credit score; each lender will calculate your credit score differently but they will typically calculate it based on:
- Information on your credit report
- Your application details
- If you’ve been a customer before, they will look at data they already have on you
Improving your credit score won’t happen overnight, if you’re hoping to secure a mortgage get in touch for your free initial consultation and we can help you get yourself prepared for a mortgage!