These days it's vital to understand your credit score and of course, it's great to know how to improve your credit score.
The better your credit score, the more confidence a lender will have when it comes to giving you credit. And that’s important to realise, most notably for the fact that these days we purchase through finance more than we ever have. There are the obvious mortgages, credit cards and bank loans, as well as car financing, mobile phone contracts and much more.
Your ability to borrow money is greatly affected by your credit score, and while each lender scores you differently, it's always good to think about how to improve your credit score…
Clear credit card balances
It may seem obvious to say this, but we’re saying it anyway, because it's so important. Clearing any outstanding credit card balances will help you improve your credit score dramatically.
This is especially true when you hold more than one credit card. The more credit cards you have, the more credit card balances you have and this can be seen as a negative factor. It’s better to pay off these balances and limit your credit spending to a maximum of one or two credit cards.
This helps consolidate your credit card balance, as well as making it much easier to manage. This will help greatly when it comes to your strategy of how to improve your credit score.
Use a credit card
Although we just mentioned that clearing credit card balances is a significant factor when it comes to learning about how to improve your credit score, we’d also recommend using a credit card. People with little or no credit history are deemed “hard to predict” by lenders.
By using a credit card wisely, you can build a “good” credit history for yourself. Best practice would be to make purchases of around £50 - £100 a month using a credit card, and then ensuring you pay it back in full and on-time. A good credit history will always stump no credit history in the eyes of lenders, so this is something to definitely consider.
Manage your finances
When looking into how to improve your credit score, we can’t recommend managing your finances highly enough. It’s a great idea to draw up a monthly budget, detailing all your expenses and what money you are due and when it’s due.
Taking the time to manage your finances greatly decreases the risk of overlooking some payments, which can in turn make you late paying bills or credit card balances. Get into a good routine with your finances, and always have, when possible, back up funds for those unforeseeable circumstances.
Be upfront about old debt
Another factor to consider when learning how to improve your credit score is old debt and how it can be a benefit. Many people are keen to omit old debt from their credit report. Many feel that once they’ve paid that debt it shouldn’t be a factor for future credit rating.
However, old debt that you have managed well is an important factor for lenders. It gives them a strong insight into how you managed debt in the past, and actually a long history of well managed debt is going to help greatly with your credit score.
Get on the electoral register
Perhaps one of the easiest things to do to improve your credit score, enrolling on the electoral register is actually a pretty important factor for lenders. If you’re not registered on the electoral roll, you could find it difficult to get credit.
Registering helps you prove where you live, as lenders check your name and address against the electoral roll to make sure you live where you say you do. It’s all about giving lenders peace of mind and confidence in you from the outset of your credit rating report.
Whilst this isn’t a definitive list of how to improve your credit score, we think these factors are hugely important and will help dramatically towards increasing your credit score. It takes time, and improving you credit score is a marathon, not a sprint. So start today and give your credit score a boost.
Posted 21/10/2016 Back to Blog