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Improving your credit score is a term bandied around a lot, but it isn’t something most of us actually take heed of until we need to. Lots of people don’t know what a credit score is, how it works or why it is important, let alone how to improve it. It is something that everybody should understand as soon as they are old enough to bank, take out loans or start receiving bills for things like mobile contracts. It has such a significant impact on future financial decisions; it should be something we know about before we make decisions that could affect it in a big way.
Take a look through this basic guide for your first introduction to credit scores, how they work and simple ways to improve them:
What Is It?
Everybody has a credit score, and it is made up of three numbers. Those numbers directly represent how likely you are to get credit in the future. Credit essentially means ‘money that you owe’ or the official dictionary phrase is:
“The ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.”
The credit number you have that is unique to you is created from your credit report, again something each and every person has. Your credit report is a detailed record of your credit history which essentially shows exactly how you have handled money you owe in the past. So every time you took out a store card, a credit card, rented a house and got utility bills, took out a loan – all of that will be on your credit report and will affect your credit score.
Why Does Your Credit Score Matter?
It is all about how you look to a somebody who you would like to loan you money, like a mortgage company or mobile phone company. They want somebody they know will pay their bills, and so the better your credit score is, to them, the lower the risk that you won’t pay the money you owe them. The higher your credit score is, the better it is and the more likely you are to have money lent to you. The lower it is, the less likely you are to get any type of loan.
You Can Improve Your Credit Score
The good news is that your credit score is not forever. There are some things that might be ‘on your record’ forever like declaring bankruptcy, and other things that take a long time to correct, but there are so many more ways to improve that score and make things better. It is also important to know that you do not have a universal credit score because every lender scores you differently. So you can turn most negatives into positives with a bad credit score, as long as you’re willing to work hard and in some cases, shop around.
How To Check Your Credit Score
Before you work on improving your credit score, it is good to know exactly what you are dealing with right now. The process of checking your credit score is quite a complicated process, and one with lots of different options. You can check your credit score using free trial services provided by Equifax or Experian. You’re also entitled to statutory reports that cost just £2 by law and the Government has now made these available online.
How To Improve Your Credit Score
Improving your credit score is actually quite easy, which is reassuring if you have discovered your credit score is quite low, take a look how:
Get Yourself On The Electoral Roll
If your name is not listed on the electoral roll, then you won’t find it easy to get any type of credit. You can get on it super-fast by visiting – https://www.gov.uk/register-to-vote. That is an instant credit improvement you can do on your lunch break!
Get A Credit Card
There are specific credit cards like these that can get that help you build your credit score. You can use them for everyday spending, using the amount up to the agreed spending limit, then repay them off every month. This builds up your credit in an easy, safe way that is within your control.
Always Check Mistakes On Reports You Have Had Done
Tiny little mistakes can have massive effects on your credit score, so you should scour your credit score with a fine tooth comb. Is your address right? Are all the details of previous dealings with companies right? Is your name spelt right? Check every single detail, so the score is 100% accurate.
Pay All Your Bills On Time
The more regular you are with paying your bills on time, the more reliable you will seem to lenders. Mobile phone contracts, utility bills or other contracts should all be honoured and paid on time every time to boost your credit score.
Check Links With Others
Any joint accounts you have with somebody in your family or a partner could affect your own personal credit rating if they have a low credit score. So if you have a spotless history of paying your bills and do not know why your credit score is low. This could be the answer. Find out more about issuing a notice of disassociation here.
Check For Criminals
Somebody could have applied for a loan in your name, and this could have appeared on your credit report. If you see somebody you don’t know appearing on your report you have to contact your credit reference agency straight away.
County Court Judgements
Getting a County Court Judgement because of debt will have a huge effect on your credit score. Avoiding them at all costs is really important. If you are struggling with debt contact Citizens Advice, National Debtline or speak to a trusted friend or family member.
Large amounts of debt in your name should be removed before you apply for a loan. If you’re unsure how to clear them, there are tons of resources online to help get a grip of your finances.
Switching Homes Regularly
Lenders feel more settled if you have lived at one address for an extended period of time. Moving house regularly flags up the potential for escaping previous lenders chasing you for money.
There is always something you can do to improve your credit score. The first step is being honest with yourself, and facing up to reality. Get your credit score now, see what that means for you now, and what you need it to be to reach your goals. By being proactive, you’re already one step closer to being the perfect customer for the lenders you’re trying to impress.