8th March 2017 at 6:10pm
To me, my credit score was always something I dreaded to think of, and didn’t want to know anything about. But as the years have gone by, my credit score has begun to have more significance in my life, as I plan to get on to the property ladder over the next few years.
Of course your credit score is not only important if you’re planning to buy a property, all creditors look at your score when deciding whether to grant you that much needed loan or credit card, or mobile phone contract.
If your score is too low creditors can reject your applications, swiftly putting a stop to those important big purchases.
So it is vital you know your score and how to improve it if it isn’t so good.
Take a look at our top tips to see how you can get on the road to having a tip top credit score. After all, the higher your score the better, and if it’s low, there is work to be done.
First things first, bite the bullet
If, like I was, you’re a little scared to take the plunge and find out your magic number just bite the bullet.
If you don’t look you’re never going to improve it.
You need to know your starting point and a great service I use is the credit club at money supermarket. It gives you your credit score monthly for free and has lots of handy tools to help you work out what loans and credit cards you are likely to be accepted for. Not only that, it gives lots of tips to help you on your way to upping your score.
Register to vote, it really does affect your score
Being on the electoral register is an easy way to improve your credit score, as it verifies your identity and confirms to lender where you live. Experian explains:
‘Lenders will check your name and address to prove that you live where you say you do. You can do this even if you are still living at home with parents, or sharing student accommodation. This makes it easier for banks and financial institutions to confirm your identity.’
Don’t miss payments, not a single one!
You may be thinking this is a bit of a given, but remember, that one missed payment really can make all of the difference and muck up your credit score, as money saving expert explains;
‘Even if you’re struggling, try not to default or miss payments, it can have a disproportionate hit. Doing this once or twice could cause problems that can cost you for years. Defaults in the previous 12 months will hurt you the most. The easy solution is to pay everything by direct debit, then you’ll never miss or be late.’
So consider carefully if you can afford to repay the credit you’re applying for and automate your payments if you can.
Don’t let your partner affect your score
If your partner has a poor credit score, it can most definitely tarnish yours. The types of products which can link you and them together are joint mortgages, joint loans, joint credit cards and energy bills.
Basically, if you are applying for credit the creditor can access not only your file but your partner’s too as you are ‘linked’ by these financial products. So, if your other half has a poor score ensure your finances are kept separate.
Consider a credit-builder prepaid card
If you have a low credit score because of past mistakes it can be tricky to get credit as lenders look closely at past behaviour to make their decisions. A credit builder or pre-paid card could be the answer to helping you build your score back up again as the money advice service explains;
‘The way this works is you’re ‘loaned’ an amount, usually £60, by the prepaid card company.
You sign a credit agreement and agree to pay the card company a monthly fee of £5 a month to repay your £60 ‘loan’.
At the end of the year, providing you haven’t missed any fee payments, this will be recorded on your credit report as 12 months of successful repayments.’
Don’t apply for more credit straight after a failed application!
If you’re applying for any type of credit you need to make sure that you space out your applications as much as possible, if not lenders may think you’re relying on them too much. You should aim to space out your applications as Experian explains;
‘Applying for lots of credit can suggest you are over reliant on credit to supplement your income. If you can, aim for no more than one application for credit in a three month period – this could be applying for a credit card, debit card, mortgage…even a car finance deal.’
Remember to cancel your unused credit cards
Having too much credit available to you can be a bad thing, even if you’re not using it. However, it isn’t just as simple as cancelling the cards, as money saving expert explains;
‘…just to complicate things, long-standing bank accounts with good credit histories can be a benefit to your credit score, so they’re often best left open. There’s no definitive answer as to whether you should close down your old cards, because all lenders are different. But, look to strike a happy medium – if you’ve lots and lots of unused credit, close some cards down, but don’t close ’em all. And above all, don’t max out. Cancel Old Cards has full info on what to close and when.’
Building your credit score isn’t easy, but I hope these top tips have helped simplify matters a little. And if you want to find out more about the common myths when it comes to your credit score take a look at our blog ‘Busting the myths on credit cards and credit scores’.