How To Improve Your Credit Score?
Our last post showed the different factors that can affect your credit score (which you can read by clicking here if you missed it!)
Now, it’s all good knowing about what affects your score, but do you know what you can do to improve it? If not – we’ve got you covered! Here, we will take you through some easy ways you can improve your credit score, which will most likely save you *thousands* in the long run. Thank us later.
Easy Ways To Boost Your Credit Score
1. Electoral Roll – This one is nice and easy – register on the electoral roll at your current address in order to prove where you live. Lenders are more likely to want to lend you credit if you have been verified on the government database. The process is simple, fill out the form, send it back, and boom, you’re on the system!
2. Building Credit History – If you read our last article on what affects your credit score, you will know that building your credit history is super important. For example, when I first left university I was looking for ways to boost my credit score. After doing some serious research, of which I’m sharing with you now, I learned that the easiest thing you can do is apply for a credit card with your existing bank (hopefully you will have been with them for quite a while, as this increases your chances of being successful). Over time, access to that credit starts building your history up, and in turn, improving your score.
3. Don’t Withdraw Cash Using A Credit Card – We told you these were easy… This is a BIG no-no in the credit world. Lenders see this as evidence of poor money management and will hurt your score badly. Additionally, withdrawing cash on a credit card is expensive as you will be charged a higher interest rate on that withdrawal; even if you repay in full at the end of the month.
4. Making On Time Payments – Whether this be rent, a credit card, or a loan repayment; just make sure that you pay all payments on time. AT THE VERY LEAST, pay the minimum repayment and this will help boost your credit score. This shows lenders that you are a reliable borrower and capable of handling different forms of credit.
5. Low Credit Utilisation – As mentioned in the previous post, a low credit utilisation can really help your credit score. Personally, this should be an easy one to follow. REMEMBER – Credit cards should only be used for your normal day-to-day spending. Basically, they should be used for their reward and refund protection benefits. Unless its for an emergency, they shouldn’t be used to buy things you cannot afford. Therefore, you should always try and keep your credit utilisation as low as possible. Example: If you spend £1,000 but your credit limit is £10,000 this would mean your credit utilisation is 10%.
6. Eligibility Tests – These are a great way to keep your credit score high by not running so many ‘hard’ inquiries on your report. Most reputible lenders will have an eligibility test on their website to show you how likely you are to be accepted for the type of credit you are applying for. Although these tests do run a ‘soft’ inquiry, it will only be visible to you as lenders cannot see soft searches.
7. Spread Applications – If you are wanting to apply for multiple forms of credit, then be smart – spread out your applications. What you need to remember is everytime you ask for credit, lenders think two things: 1.) Can this person repay this back? 2.) Why is this person applying for credit? If your friend came to you and asked to borrow £100 and the next day asked to borrow another £100, you would surely ask them why they need to borrow more? This is the same for lenders, they will question the need for more credit when you have recently applied for it.
How long does it take to improve your credit score?
There isn’t really a set time for your credit score to improve. It depends on the damage done to it prior to you making changes to your lifestyle and financial behaviour. Information can actually take up to three months to reach credit lenders before showing on your report.
However, this means that in those three months; if you do make regular on-time repayments, keep your credit utilisation low, as well as getting your own report in order, then this can go a very long way to making big gains.
With credit scores, it’s very important to understand the basics of how they work and what you can do to affect yours in a positive way. To help you, we’ve started a credit report series in which we will keep posting useful guides, so you can keep on top of your own report and keep your score looking great.