Are you looking for ways to improve your credit score?
Getting turned down for finance or credit time and time again can take its toll on more than your bank balance. From being denied a new mobile phone contract to not quite meeting the criteria for the comfy sofa you had your eye on, it all boils down to what’s written in your credit history.
Whether you want to secure a mortgage, get approved for a loan or a credit card, there are a few things you can do to boost your “creditworthiness.” Here are 6 ways to improve your credit score:
A good credit score
Despite common belief, there is no such thing as a universal credit rating or score. Each lender has its own unique set of criteria, which establishes if they think you are a customer worth investing in. Some will focus on specific repayments over a period of time. In contrast, others will put you, the customer, at the centre of their process. They will take your circumstances into consideration above all else, rather than focus on pure data, such as bad credit car finance companies.
Within the UK, there are three main credit reference agencies that use a scale to determine what is a “good” or “excellent” credit score from the information held in your credit report:
6 Ways To Improve Your Credit Score is a feature post
- Equifax: 420 to 466 is good; 467 to 700 is excellent
- Experian: 881 to 960 is good; 961 to 999 is excellent
- TransUnion: 604 to 627 is good; 628 to 710 is excellent
Lenders use this information as a foundation to figure out if you are worth the investment. However, lenders will ultimately refer to their own systems even if you have a good or excellent credit score. So you may be accepted by one lender but rejected by another regardless of having the same inputted data and credit history to go by. Read on for our top 6 tips to improve your score:
Register to vote
On the surface, registering to vote may seem unimportant, but if you are not on the electoral roll, you may encounter your first stumbling block for getting credit. You see, one of the most vital checks lenders have to carry out is identity – in a nutshell, all of your personal information needs to tie you to your credit history, including your current address.
Without your application matching your details on the electoral roll, you will likely cost yourself as much as 50 points from Experian – the largest and most recognised credit reference agency in the UK. What’s more, registering to vote costs you nothing.
View your credit report and correct any mistakes
Never before has identity theft been more of a concern within the financial world. Millions of payment holidays have been processed in the wake of the coronavirus pandemic, and unsurprisingly issues have arisen. To safeguard your credit report, it’s worth checking it at least once a month to ensure all your information is current and correct.
Your statutory credit report belongs to you. So, checking your information against all three main credit reference agencies will highlight any errors or mistakes. If you spot any, you must notify the relevant agencies or companies to make sure they do not negatively impact your credit score.
By simply contacting the company that has provided the incorrect information, they should endeavour to fix the problem on their end.
Request soft searches
Every time you apply for credit via a lender, they will perform a hard credit search to determine your eligibility. Each of these “hard” searches leaves a footprint on your credit file that other lenders can see, which, as you can imagine, takes a small hit on your credit score.
However, you can request that lenders perform a soft search instead during the application process. That way, you can get a better idea of if your application will be accepted and get an idea of all the additional interest rates attached to your loan. Unlike a hard search, soft searches are only visible to you.
Today, most online lenders offer a soft search in the preliminary application. Still, it is worth checking out before hitting the apply button.
Avoid multiple applications
Nothing screams financial difficulty more to a lender than viewing a customer’s credit report with multiple applications attached to it. So if a lender has recently rejected you, we’d recommend holding back on a new application. That way, you will avoid any potential red flags and hold on to those valuable credit points.
It’s worth bearing in mind that each application will appear on your report for 12 months regardless of its success. Therefore, spreading out loan and credit card applications by at least three months will ensure your credit score looks more reliable to any prospective lenders.
Repay on time
Lenders like nothing more than investing in a responsible borrower. That means never missing a repayment and sticking within any credit limits you have agreed to.
If you run into financial difficulty along the way and know you cannot secure the funds to make your payments on time, contact your lender immediately. Seeking their help as soon as possible looks far better than racking up debt with zero explanations. Any late payments that are not accounted for will show up on your credit report within a month.
According to Experian, one late payment on a loan or credit card can damage your score by 130 points. So maintaining a conversation between yourself and the lender will allow them to signpost you in the right direction for help. Whether that’s a payment holiday due to the coronavirus pandemic or reducing a months repayment amount, lenders will do what they can to help you avoid impacting your score.
As a general rule, late payments will show on your report for six years. However, over time, its effect will lessen, and if you have only missed one payment, your score should start to recover within six months and may fully recover within a year.
Clear debt faster
Although making the minimum repayments on your credit card each month is all that is required of you, lenders may start to assume that you are struggling to clear your debts. So repay more than the minimum where possible. That way, you clear your debts faster and keep your credit score looking healthy.
Ready to get your next loan approved? With a few simple tweaks, getting credit has never been easier.