Your credit score (or rating) is an essential measurement of how you as an individual rank in terms of creditworthiness – so you need to protect it and nurture it. A credit score can seem like a confusing and intimidating number, and you may be tempted to ignore it if it’s not great. However, it’s important to understand how to improve your credit score as it’s this statistic that will have a significant influence over whether lenders believe you are worth lending to, and so your ability to obtain credit cards, mortgages, personal loans and other finance products.
This might sound counter-intuitive but the thing about a credit score is that you need to have some history of borrowing to create a good one. If you’ve never borrowed anything, had a mobile phone contract or owned a credit card, for example, then there is no evidence that you’re able to manage borrowings and repay them on time and this can be just as damaging, when you’re being assessed for something like a mortgage, as having a bad credit score. So, if you want to make sure that you’re a good lending prospect, you need to have a small amount of borrowing on the record.
Make sure you’re on the electoral register
It’s much more difficult to obtain credit of any kind if you’re not on the electoral register, or you haven’t updated your details recently. Whether you register to vote online on by post, just make sure that you do it before you apply to borrow.
Fix mistakes on your credit report
It’s important that you keep an eye on your credit report as your score may be less than it should be as a result of mistakes – which can be fixed. Experian and Equifax both offer access to your credit report, with a free 30-day trial that you can cancel once you’ve seen what you need to. If you discover something on your credit report that is incorrect or needs to be fixed then contact the credit reference agency and tell them. Once you have made contact they will have 28 days to deal with the mistake or let you know why they don’t think it’s a mistake. During that time, the information relating to the mistake won’t be available to any lenders looking at your credit score to make decisions about lending.
Cancel any cards that you don’t use
If you’ve got lots of open credit cards but you’re only using one then cancel the others so that your credit score shows less credit accounts. If you have a lot of credit cards sitting around with the full balance available you’re also opening yourself up to being the victim of fraud. Avoid the temptation to spend – for you or someone with less than honest motives – and cut up the cards you’re not using then call the provider and close the account.
Make your payments on time
It doesn’t matter how much debt you have, what your income is or what you do with your money, the one factor above all others that will help to improve your credit score is to ensure that you’re making payments on time. If you don’t pay on time then you won’t be an attractive prospect to future lenders and this will be reflected in your credit score. If you can show a consistent history of making payments and clearing debt – no matter how small the repayments are – then you’re a sensible borrower who is able to manage borrowings alongside the financial demands of daily life and this will boost your creditworthiness considerably.
Don’t use credit repair businesses
These organisations often promise to fix problems with your credit report that can’t be fixed and will charge large sums for things you could do yourself. Most of the time they are simply contacting a company that has sought a County Court Judgement (CCJ) against you and negotiating on your behalf. This is something that you can easily do yourself without paying the fee. Anything else these businesses promise is usually simply hot air.
Avoid using credit cards for cash
If you start withdrawing money on a credit card then you’re going to be paying through the nose as interest is much higher and you will be paying this interest even if you repay in full at the end of every month. You’ll also find that withdrawing cash on a credit card is something that lenders see as evidence of an inability to manage your money – the only exception is if you’re using a particular type of credit card for ATM withdrawals abroad.
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- Why a Vanquis credit card could help rebuild your credit
- Make your regular purchases on a “bad credit” credit card
- How to manage your credit rating