10 Steps to Improve your Credit Score
Your credit score is everything when it comes to borrowing. It dictates what types of loans you can get, what rates you’ll get on credit cards and mortgages as well as other forms of credit too. So, if your credit score is less than ideal, it can be difficult finding a financial product that you will actually qualify for.
So, on the road to secure yourself better rates on credit cards, loans and mortgages in the future, you’ll need to start working on your credit score. Luckily, we have a 10-step guide on how to improve your credit. Let’s look at how you can work to improve your credit score:
Steps to help improve your Credit Score
1. Know your score
First and foremost, it’s important for you to check your credit score. But what is your credit score and how is it made up? Well, your credit score is reflective of your credit report, a detailed list of all of your financial history. It’s made up of all of the financial products you’ve taken out: such as a loan or even a credit card. It measures you on a combination of your current debts (how much you have) as well as your ability to repay on time. If you have any late or overdue repayments or outstanding debt, it will affect your overall credit score. Also, you’ll be able to see if there’s been any fraudulent activity, which might be affecting your credit score.
There are so many sites you can use to check your credit score. Luckily, there are loads of free options out there for you to check your credit score! We’ve listed three sites below (that are free):
Use any of these free sites to check your credit and complete step 1.
2. Flag up errors
From time to time, you may find that there are errors on your credit score. Whether it’s fraudulent activity or just a mistake, you need to notify your credit agency that it’s there. An error on your report can negatively impact your credit score. So, to start rebuilding make sure that any and all errors are removed from your account. Once notified, your credit agency will take care of the issue.
3. Start simple
For those that have never taken out a form of credit before, you’ll have no credit score – which in the eyes of lenders, is just as bad. So, if you have no credit, start simple. Get your name on some household bills to show that you’re consistently making repayments. Switch your phone contract over to your own name (if not already). This will start building your credit score if you haven’t got one already.
However, for those with a bad credit score, it’s also ideal to start simple. Start making moves to begin clearing some of your debts. Showing that you’re consistently making repayments is a good thing and will get you on the right track towards good credit. Whilst amassing more debt may not be ideal, many use bad credit lending options, like guarantor loans, to consolidate multiple debts into one manageable repayment. Repaying your guarantor loan, on time, will help rebuild your credit score. Making sure you’re clearing debt and making regular repayments is a simple way to get started on rebuilding your credit.
4. Cancel some credit
If you have multiple forms of credit, which you don’t use, it can poorly affect your credit score. So, if you have any credit cards you’re not using, you could cancel these cards in order to begin to improve your credit and increase chances of being approved for other credit options in the future. If you’re not using it, get rid of it – as long as there is no outstanding debt (otherwise you will not be able to cancel unless you can repay in full).
By getting yourself registered on the electoral register you can start to improve your credit. It’s really easy and simple to do. You can do it online or by contacting your local council. It does not take long to register and goes a long way to improving your credit score.
6. Be ‘Stable’
It’s ideal for lenders to see that you’re living stably. What we mean by this is that you should try and remain at the same living address and keep the same job. Stability is key for lenders as they want to make sure that you have a stable income and living situation that won’t suddenly change. So, for those trying to build their credit score, and those trying to rebuild it, make sure you follow the advice above.
7. Be Patient
Above all else, rebuilding your credit score takes time. It’s not something that will happen quickly and takes a little as 6 months before you see any noticeable impact. Applying for credit too early, and having your application rejected, can impact your credit score. The key thing to remember is that it will take time, but it will be worth it.
8. Cut Ties
If you have shared credit with someone in the past, and their credit score is bad, it can actually bring yours down. Whether it’s a joint account or a joint mortgage or loan, their score can make yours look bad. So, cut your ties with them – financially. If you no longer use the credit account, it can be cancelled (if it’s a current account or credit card account), or you can declare your independence to your financial product lender (be it a loan or mortgage). Make sure you’re financially independent if you want your credit score to be improved.
9. Be consistent with payments
As we’ve said above, missing or making late repayments can affect your credit score. So, in order to make sure you’re working to improve it, you should look to make repayments on time. A great way to do this is to set up direct debits and make sure you make not of when things need to be paid. Whether it’s bills or your mobile contract, ensure you’re paying them on time and not letting them default. If you keep making repayments on time, you’ll see your credit score to improve over a few months.
10. Keep checking
We’ve come full circle, but once you’ve taken all the steps towards improving your credit, make sure that you’re checking your score frequently to see the improvements. We’d recommend checking your credit report once a year (every 12 months), so you know where you stand with your credit score. You might find that after a year, it has significantly improved meaning that you have more financial product options open to you and may be more likely to be accepted.
Remember, you’ll need a good credit score to receive better rates on loans, mortgages, credit cards and more! So, make sure you’re working to improve it.