Your credit score is one of your most valuable financial assets. It influences your ability to access credit, including loans, mortgages and credit cards, and can dramatically affect the rate of interest you pay. Lenders typically restrict the best deals to borrowers with a good credit history so, the stronger your score, the less interest you will pay overall. Here are 10 ways to boost your score:
1. Check your credit score and correct any mistakes
A credit report (also known as a credit file) contains information that has been compiled by a credit bureau about your credit history. This information is collated from a number of sources and includes information on what you currently owe, how well (or badly) you have managed credit in the past and, whether you are registered on the electoral role. When considering an application for credit, as well as scoring you against their own criteria, lenders may refer to one or more credit reports on you.
Any missed or late payments stay on your credit file for 6 years
You can check credit files held on you by getting a credit report from either of the UK’s main three credit bureaus - Equifax, Experian and Callcredit - or from one of the third-party agencies that use their data. When you receive a report - check it. If it contains any mistakes, immediately notify the relevant agency. You can also ask for a note to be put on your file to explain extenuating circumstances regarding problems or if, for example, a debt issue has been resolved.
The credit agency is legally required to review any issues you raise. Any negative information should only remain on your record for six years.
Prices for credit reports vary along with the type and quality of data provided.
2. Register to vote
Your presence on the electoral roll provides lenders with proof of your name against a fixed address and helps to combat fraud. If you're ineligible to vote in the UK you should send the credit-rating agencies proof of your residency and ask them to attach a note to your file to verify this. Acceptable forms of identity include a utility bill or UK driving licence.
3. Manage credit responsibly and on time
When assessing an application, lenders will look for evidence that you are a responsible borrower and have a good record of repaying previous credit. They will search your credit report to build a picture of how you are managing any current credit you hold, how you’ve managed it in the past and, will view a late or missed payment as a breach of contract.
Any missed or late payments on anything from your mortgage, credit card, personal loan, or utility bills will stay on your credit file for six years. So, it's important to make sure you keep to agreed repayments. A direct debit on or before the payment date (even if this is for the minimum amount) will help you keep your repayments on track.
4. Don't max out on existing borrowing
It should help your credit rating if you don't borrow up to the maximum on your existing credit cards. Lenders may be nervous about allowing you to borrow more money if they think you are already over stretched. As a rule of thumb, try not to exceed 30 per cent of your total available credit limit every month.
5. No credit history equals poor credit history
Prospective lenders look at your history of repaying previous debts as a way of indicating your ability to repay new borrowing. This can be a problem if you have no prior history to point to. However, there are credit-builder products available. These products tend to attract higher rates of interest but, if you clear the balance in full each month that needn't be too much of an issue.
Other factors that can have a positive influence on your credit score include – a settled period at the same address; a history of long-term employment; increasing your salary; supplying a landline number; keeping your bank account in credit or inside an agreed overdraft limit.
6. Close old accounts
In assessing your suitability for credit, lenders look at how much credit is currently accessible to you - not just how much you are actually using. So, close any old, unused accounts you hold.
7. Smart search for credit
A ‘smart’ or ‘soft’ search for credit will help you find products which you are likely to be accepted for, without damaging your credit score. When you apply for credit, the application leaves a mark on your credit score. Unsuccessful or repeated applications can have a negative effect on your credit score. A soft search lets you check what credit deals you are most likely to be accepted for without affecting your credit score. For instance, GoCompare offers a soft search tool for loans and MoneySavingExpert offers tools for credit cards.
8. Don't make multi applications for credit
Multiple applications for credit can have a negative impact on your credit score and can adversely affect your ability to obtain credit in the future. Every time you apply for credit it is recorded on your credit report. When checking your eligibility for future credit, lenders see your previous applications and may mistakenly assume that if you’ve declined an offer, you were rejected. Also, multiple applications made in a short period may make you look desperate for money.
9. Take care with joint accounts
Your ability to obtain credit may be affected by who you are financially associated with. You are financial associated with someone if you hold a joint credit account or mortgage. You should always make sure that your credit history is separated from ex-partners and that the information held by credit bureaus is an accurate reflection of your current circumstances.
10. County Court Judgments (CCJ) for debt seriously impact your credit score
A CCJ (called a decree in Scotland) for an unpaid bill will seriously inhibit your credit score and your ability to obtain credit. CCJs stay on your file for six years. If you have any CCJs which are now settled, ensure your credit file is updated to reflect this.
Thanks to GoCompare.com.
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