6 Ways to Improve Your Credit Score
Contributed by @YemiAwop
A credit score is a rating to describe what type of borrower you are. The higher your score the more desirable you are deemed to be as this signals you can behave responsibly with credit. With a high score, you gain access to the best deals such as better interest rates on mortgages and credit cards.
If you’re looking for ways to improve your score, look no further as here are 6 ways to do so:
1. Check your credit file for mistakes and fraud
Many people are too scared to check their credit report because they’re afraid of the demons that may be uncovered. But regardless of your financial background, it’s very important to ensure the information held is correct, this also helps against fraud prevention. Additionally, it’s good to see where you are starting from and by how much you need to improve. You can check your score for free here: Experian, Noddle & Clearscore.
2. Ensure that you are registered to vote
One of the major checks credit reference agencies do to confirm your identity is to check the electoral roll register. If they can’t do this then your chances of being accepted for credit decreases.
3. Pay your bills on time!
Late and missed payments can stay on your credit report for at least 6 years.
To avoid missing payments:
Set the payment date to a few days after you get paid
Set up a direct debit
Get reminders via text or email for when your payments are due
4. Pay down existing levels of debt
If you have a credit limit of £5K and you use £3k, your credit utilisation rate is 60%. A high utilisation rate could signal that you are financially stretched or lack good money management skills. The sweet spot is around 30% so try to cut down to that level and your rating should improve.
5. Think about obtaining a credit-builder credit card
Credit builder cards are specialist products, which are accessible to customers who would usually struggle to be accepted for a credit card because of their financial background.
Although these products often have higher interest rates and lower credit limits, they are an opportunity to demonstrate responsible credit behaviour, which ultimately improves your score. Just make sure you make small purchases and aim to pay off in full each month.
6. Use the “Rental Exchange”
Experian has launched an initiative which aims to enhance your credit report by creating an online history of your rental payments. As long as you pay your rent in full and on time, this initiative will be able to prove that you are a reliable potential customer for future credit agreements. To read more about this click here.
Don’t neglect your credit score - take care of it now and it will take care of you in the future.