Often, one of the biggest barriers to getting your finances in order is a poor credit rating. If you find you’re often rejected for credit, for something as simple as a mobile phone contract or as big as getting a mortgage, but not sure why, then it’s time to take steps to improve your credit score.
Taking time out to ensure your records are accurate and the best they can be is essential. Lenders use your score to determine whether you are 07responsible enough borrow. A poor score can impact various aspects of your finances, including monthly car insurance and even your banking. These days financial organisations run credit checks even if you’re opening a straightforward savings account or cash ISA. We’ve put together some top tips to help you improve your credit score so that you can stay on track with you finances.
Get on the electoral register
If your name isn’t on the electoral register, you’re unlikely to be considered for any kind of credit. This is one of the simplest steps you can take to improve a credit score pretty much immediately, yet surprisingly, millions of people are not registered.
You can register to vote here.
Make sure you are registered on the electoral roll at your home address and then also make sure all your addresses for banks accounts, phone bills and so on match.
Get a landline
With mobile phones now the norm, people often decide to ditch the landline. But if you have a poor credit score, then get a landline. It shows lenders that you’re stable and it can also help with security checks, which are carried out when you apply for financial products. When applying for credit, use your landline on the forms.
Check your credit file
If you haven’t checked your credit file, you can do this for free. To get a full picture of your finances, check your file with all three UK credit reference agencies – Equifax, Experian and Callcredit. The information held between them may differ and you should check it regularly.
Checking them will also help you identify any errors, which could be working against you, as well as alert you to fraudulent activity.
You can check your score for free with Experian, Clearscore (which covers reports from Equifax) or Credit Karma(which covers reports from Callcredit).
Cancel unused cards
If you’ve got a credit or a store card, but not using it, then cancel it. Too much credit can be seen as bad credit – even when it’s not being used. However, if you have been with a bank for a long time and have a good credit history, these would be best left open as they can help ratings.
Clear your debts
If you have debts, then try and clear what you can. If you have savings, use that to pay off debt — you would be better off clearing expensive debts with your savings than keeping it in low interest rate savings accounts.
Build a credit history
If you’ve never had a credit card then it’s a good idea to get one, just to build a credit history. Having some credit shows lenders that they can trust you as a borrower. If you’ve never had any credit, then they have no way of knowing.
Get a credit card and buy something small with it every month, even if it’s just your travel to work to build credit history.
Pay off your credit card in full every month, by setting up a direct debit, to avoid interest charges.
Don’t apply for too much credit
Don’t make too many applications, such as phone, insurance and store cards, in a short space of time. These will show up on your file and work against you.
If you’re moving house, make applications before you move as your credit history will not match your new address and could lead to rejection.
Joint finances
If you have joint finances with someone, maybe a joint account or a credit card, make sure you both maintain a good credit score. If this is not possible, keep your finances separate.
Use an eligibility checker
If you are applying for credit but not sure you will pass the requirements, use an eligibility checker for a soft search, which doesn’t show up your file. It allows providers to see some information about you to decide if you are likely to be accepted.
Many credit companies and financial services companies provide this type of check.
Photo by William Iven on Unsplash
