Credit Score

10 ways to improve your Credit Score

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Why is your Credit Score important?

My credit score for years was like England’s overall Scoreboard in the Eurovision Song Contest. At the lower end of the leaderboard. I couldn’t figure out how to improve it. Well, let’s be truthful here. I couldn’t figure out how to improve it without tackling the wider issues at the time. Overspending and Credit Card debt.

Do you know what your credit score means for you?

What does your credit score mean?

Experian sent out an email this week as part of their Money Matters Week, which posed this question: Do you know what your credit score means? To summarise, a higher credit score means companies see you as a lower risk, so you’re more likely to be approved for credit. A high score indicates a history of managing your credit sensibly and making repayments on time. You can change this over time if you have a low credit score. Check out our 10 ways to improve your Credit Score below.

Your credit report includes things like:

  • How much money do you owe, e.g. on credit cards or mortgage?
  • Your regular payments and whether you make them on time
  • How many credit accounts do you have and how old they are
  • Your credit limits and how much you use of them
  • Check to see if you are registered to vote
  • People who you share finances with, called your ‘financial associates’
  • Publicly available information, e.g. if you have a County Court Judgement

Improving your credit score

When I had no salary coming in, I streamlined all of my spending. By paying off a little on my credit cards each month without putting more on my cards, my credit score went up! I couldn’t believe it. Years of overspending on my credit cards and only paying the minimum payments meant that I was permanently showing up with a low credit score how times have changed!

Credit Score

10 ways to improve your score:

1. Register on the electoral roll

Register on the electoral roll at your current address to prove where you live. You can do this even if you’re in shared accommodation or at home with your parents.

2. Build your credit history

Having little or no credit history can make it difficult for companies to assess you. So your credit score may be lower as a result. This is a common problem for young people and people new to the UK. Luckily, there are some steps you may be able to take to build up your credit history. You can open a bank account and apply for a credit card with the bank you are currently with, as long as you show you are managing your money well. Don’t start making multiple credit card applications, which might hurt your credit rating!

3. Make your monthly payments on time

Paying your accounts on time and in full each month is a good way to show lenders you’re reliable and capable of handling credit responsibly. I always set my payments to go out on the 1st of every month, so they leave my account just as my salary goes in. Your credit record shows future lenders when you have missed or made late payments.

4. Close unused accounts and credit cards

A large amount of available credit may make lenders think you can’t handle more. So, you may want to close any dormant credit accounts and unused credit cards.  Long-standing well-managed accounts will usually improve your score. According to Experian, as a general rule, lenders like to see you keeping your credit utilisation below 25%.

5. Keep your credit usage low 

Your credit usage is the percentage you use of your credit limit. For example, if you have a limit of £2,000 and used £1,000, your credit use is 50%. Usually, a lower percentage will be seen positively and will increase your score. If possible, try and keep this at 25%. When I was only paying off the minimum payment each month on my credit cards, my credit usage was at an all-time high. My credit score suffered as a direct result. Yours will too.

6. Don’t withdraw cash on credit cards

Withdrawing money on your credit card is expensive and an indicator of poor money management. Just don’t do it.

7. Request that unfair defaults are removed

Check if there are any defaults against your credit file. I have often challenged a default if this was not my fault. Check to see if credit cards are registered to an old address. Correspondence may still be sent there, which can also pose a fraud risk.

8. Don’t let your partner ruin your finances

Lenders can see their history when you’re assessed, so be careful if they have a bad history. We are talking about joint mortgages, loans, bank accounts and sometimes utility bills. Credit cards are not the same. If you split up from your partner, delink your finances as soon as possible. Transfer everything from a joint to an individual account, although this may mean paying off credit or loans first.

9. Payday loans are a big no-no

Payday loans on every level are not worth killing your credit score. Most things will stay on your credit score for 6 years. Unfortunately, some mortgage underwriters won’t lend to anyone who’s ever had one. 

10. Pay off your debt

I spent years paying off 35k worth of debt. Make sure you have an emergency fund saved up for yes, you guessed it an emergency. However, focus your attention on paying off your debt to gain financial freedom. No one will want to lend to someone whose debt is out-of-control. If your debt is overwhelming you, please get help. National Debtline or Stepchange can help with your finances. You may like to read, 5 tips on how to cope with financial stress.

The best 3 ways to check your score

Sara Williams, a top UK money blogger, recently wrote this brilliant article on her website Debt Camel: The 3 best free ways to check your credit score & records.

A comprehensive guide to checking your credit score, Sara recommends the top 3 FREE ways to check your credit score:

The Top Three Credit Checkers – all FREE!

There are three main Credit Reference Agencies in Britain: Experian, Equifax and TransUnion  (used to be called Callcredit). They do not all have the same information. None of them is “better”. They are just reporting on information from different lenders.

Why not try MSE’s Credit Club

I was paying £14.99 for years to watch my credit rating flatline passively. It used to leer back at me, telling me yes you really are useless with money and you are not getting any better. Do sign up and watch your credit rating over time.

How to improve your credit score this year:

Your Credit score health is incredibly important to your present and future. I have no intention of buying a house at the moment. Yet knowing that anything on my credit file might hang around for 6 years is a huge shock to the system. I signed up for MSE’s MoneySavingExpert club last year, the first time my Credit Score ever improved. However, it started to decrease again this year because I started to spend again on Credit Cards just before Christmas. Do make this the year you keep a check on your Credit Score. Check our 10 ways to improve it to kickstart the year.

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