You credit score is a key indicator of how good you are with your money and how you manage credit. Your credit score can affect a whole range of different financials factors and it no longer just about if you’d get approved for a mortgage or not. Its recommend that you get into the habit of checking your credit score regularly and keeping your score healthy. If your score is a little on the low side, there are a number of ways in which you can help to rebuild your score.
Why is a good credit score important?
Not only can a good credit score help to increase your chances of getting approved for a loan, but it can also affect the rate offered. From a lenders point of view, people with good credit scores can be seen as less of a risk. This is because you usually have a good history of making repayments on time and manage your finances wisely.
Having a low credit score doesn’t mean that it’s impossible to get approved for finance but it can mean you may have less chance of getting approved or pay higher interest rates. For example, if you are applying for a car loan, you could consider a bad credit car finance specialist who can help secure you finance with affordable monthly payments. Alternatively, you could work increasing your credit score in the run up to a finance or mortgage application to help give you access to better rates or higher borrowing amounts.
How to increase your credit score?
Increasing your credit score does take time and effort but with a little bit of TLC, your credit score can start to rebuild. There are a number of ways in which you can easily start to rebuild your credit score.
Make payments on time
One of the biggest factors that affect your credit score is your payment history. Your credit score is calculated by the amount of credit you have and also how you pay it back. Late repayments can negatively affect your credit score and missing them altogether can have a detrimental effect.
It can also limit your ability to get finance or credit in the future. If you have a credit card, you should try to pay at least more than the minimum amount required. Only paying the minimum repayment each month can indicate that you are struggling to keep on top of your finances. If you know you can’t repay or will struggle, you should contact your finance lender first to see how they can help.
Build a credit history
Many people assume that if you have no credit history then you will have a good credit score. However, lenders can’t predict what type of borrower you will be if you haven’t taken out any credit in the past. You can get a credit history by taking out something as simple as a mobile phone contract in your name and repay it each month. You could also use a credit building card and make small payments each month and then pay them back in full.
Prove where you live
Finance lenders like to see stability, especially if they are handing out large loans. They tend to favour people who don’t move around as much and have a fixed permanent address. Financial lenders use the UK electoral roll to verify applicants. The electoral roll allows them to check your living address and verify that you are who you say you are. If you aren’t currently on the electoral roll, you could consider registering to help your chances of being approved.
Keep your credit utilisation low
Your credit score takes into account how much credit you have available and also how much you’re using. This is known as the credit utilisation ratio. You should try to keep your credit utilisation as low as possible. If you can, you should only use around 50% of your available credit. For example, if your credit card limit is £1000, you should only make purchases up to around £500. If you really want to boost your score, you should try to use around 30% of your available credit limit.
Fix any mistakes on your credit file
Your credit score is based on the information listed on your credit report. You can view your credit report for free using a number of trusted credit referencing agencies. When you check your credit file, you should make sure all your information is accurate and up to date. Having information that is incorrect can negatively affect your credit score. If you see any mistakes on your account such as if an account shows as being open when it has been closed, you can contact the credit agency who provided your report to dispute it.