Tips to improve your credit rating
Financial difficulty or mismanagement in the past may have damaged your credit rating, but this can be improved. This guide provides you with all the tips you will need to improve your credit rating for the future.
What is a credit score?
Your credit score is calculated based on information on your credit report and shows lenders how likely you are to be accepted for credit. Your credit score is Important as lenders will check this when you apply for any financial product.
It’s important to make sure you have a good credit score because it not only determines if you will be accepted for credit, it also determines the rate that you are offered. Your credit score will be taken into consideration on different occasions, from applying for a mortgage, applying for a loan, getting a credit card and even when taking out a mobile phone contract.
What does my credit report include?
Your credit report includes information such as; your current borrowing, your current credit limits and whether you make payments on time.
How can I check my credit report?
To check your credit report, you can contact a credit reference agency. Free trials are available from Clear Score (Equifax) at https://www.clearscore.com/ and Noddle (Call Credit) at https://www.noddle.co.uk/.
How to improve a credit score
Avoid a payment break
Taking a payment holiday or any other pre-arranged payment break might affect your credit score, although it is advisable to talk to your creditor as soon as you begin to struggle making the repayments.
Register on the electoral roll
Registering will establish your identity to lenders as well as demonstrating your stability, 3 years of voting history is a great way to boost your credit score.
Take out a credit card
Spend a little on the card every month making sure that it is repaid in FULL the next month. It is better for you to take out a few cards and keep the spending to significantly below the credit limit than maximising the amount on one single card. Potential lenders do not like to see current credit at the maximum limit.
Show your stability
Staying at the same job or address for a long period of time shows the lender that you are stable. Loyalty to one bank is also considered to be beneficial for your credit score for the same reason.
Keep applications to a minimum
If you have been declined for credit, do not reapply straight away. Instead, check your credit reference file to see if something is on there that shouldn’t be. Next, use a soft search tool such as Freedom Finance.
Consider your financial links
If your partner has a poor credit history, this may be linked to you through utility bills, bank accounts or your mortgage. To avoid this, try to separate your credit accounts and bills.
Stay up to date
Ensure that your credit reference file is up to date. This can be checked through credit reference agencies such as Equifax, Experian or Callcredit.
Take out a phone contract
Whether it is a landline or mobile phone, a telephone contract will help to boost your credit score so swap that pay as you go!
If you have a poor credit score that needs a boost, visit: https://www.freedomfinance.co.uk/guides/poor-credit-history/