WARNING: Late repayment can cause you serious money problems. For help, go to moneyhelper.org.uk

How To Improve Your Credit Score

March 18, 2020

Your credit score reflects your ability to get credit and will be looked at by any company that needs to see how reliable you are. When applying for credit, the company you are applying with needs to be satisfied that you’re a low-risk customer.

Your credit score shows this – a figure is made up of the factors on your credit report. The higher your score, the more likely you are to be accepted for credit. With a low score, you may struggle to be accepted by companies.

Prove where you live

Being registered on the electoral roll is proof of your name and address which is seen positively on your credit report. Keep in mind that changing your address regularly can stunt this.

Build a credit history

Your credit score will suffer if you have little or no credit history. This is because you have insufficient evidence of borrowing money, so companies aren’t able to assess how you manage your accounts.

Make payments on time

Making payments on time demonstrates reliability. Missed payments will cause companies to adopt the assumption that you aren’t responsible, therefore, cannot handle credit.

Keep your credit utilisation low.

Credit utilisation is the percentage of credit you have used of your credit limit. For example, if your total credit limit is £1000 and you owe £500, your credit utilisation is 50%.
Ideally, you want your credit utilisation to stay around 25%. Lower percentages are seen positively, as higher percentages can imply that you struggle to keep on top of your commitments.

Restrict how often you apply for credit.

Too many applications in a short space of time will cause companies to think that you are reliant on credit. Try to limit your applications to 1 every 3 months as a maximum.

Close unused credit cards and accounts.

Having too much available credit can lead to companies deciding that you can’t handle any more. Consider closing your old accounts that are no longer in use.

Don’t overestimate.

Only borrow what you know you can repay. If necessary, use an online budget planner to calculate what you can afford. Companies will also check your affordability by looking at your income and outgoings.

Check your credit report regularly.

Keep an eye on your credit report to ensure everything is as it should be. Look out for any fraudulent activity and incorrect late payment reports, and be sure to report them to get any issues resolved.

Set up direct debits.

Companies need to see that you’re able to make your payments on time. Setting up direct debits for your regular payments will ensure your bills get paid on time, every time.

Consider a credit-builder credit card.

Credit-builder credit cards are designed for customers with little or no credit history, and those wanting to improve their low credit score. The credit limits are usually low with high interest rates. However, being on top of your payments can boost your score.

Check your social media score.

Finance companies can also use your social media score to get an idea of your creditworthiness. To access your social media profile, get your Notty account here: https://www.notty.co.uk/