There are a wide range of ways to improve your credit score; something which is becoming increasingly important in the modern day. With loans and financial services becoming much more competitive as the years progress, lenders and providers have to more stringently check applicants and customers like never before. It doesn’t matter what kind of loan you apply for; whether it is an unsecured loan, payday loan or something else, your credit score is crucial.
And, it isn’t just seasoned borrowers who have to find ways to increase and improve credit scores either. Everyone, from first-time borrowers to guarantors to experienced and regular borrowers are seeking the most effective ways to secure the funds they may be desperate for.
It can be difficult finding ways to improve your credit score, as some lenders put more emphasis on credit scores than others. However, it is never a bad thing to improve what in essence, is a ‘school report’ for you financial situation. Based on current and past transactions, arrangements, agreements and monetary matters, credit scores are a strong indication to lenders whether or not you are a safe and desirable prospect to lend to.
Everyone has a credit score; albeit some peoples’ are less populated than others. Every time you apply for anything from a new credit card to a mortgage, it is recorded on your credit report, which in turn contributes to your overall credit score.
Checking your credit score is extremely easy, with a wide array of service providers around such as Experian or Clear Score. These providers allow you to (often freely) check your credit score and see where you stand.
Using your details, financial history and up to date statistics and analyses, your credit score is a very important aspect of your financial past, present and future.
What is a Credit Score?
In short, a credit score is a report based on your past and present financial transactions and practices, which indicates whether or not you are a ‘good customer’ and prospect to lend to and engage with. Credit scores are mainly utilised by lenders of loans and finances to make sure that their money is in safe, reliable and trustworthy hands.
The underlying basis of any application for a loan which you may make; be it online or otherwise, is your credit score. Your credit behaviour is what contributes, positively or indeed negatively towards your credit score. There are many different practices and recommendations which when combined, all go a long way in improving your credit score which will, in turn, stand you in much better stead in the future for all nature of financial engagements and interactions.
Your credit score also reflects all approvals, rejections and outstanding applications and commitments. Therefore, if you owe money, it is imperative that you pay it back as soon as possible to optimise your credit score.
Why it is Important to Check Your Credit Score
Just because everyone has a credit score, does not necessarily mean that everyone checks or even knows how to check theirs. It is so important that you are able to access your credit files and gauge an understanding of how any lenders and providers view you. Moreover, it is crucial to ensure that there are no errors contained in the report that may negatively impact your position.
As every application; successful or not, is recorded in your credit report, contributing to your credit score, it is worth checking out before applying for any loan or taking out any significant contract or obligations.
For those who believe they are in difficult times or who think that things are out of control and their credit report and credit score simply act as a wakeup call, it is important to get in touch with those who can help you manage your debts, such as the Money Advice Service.
How can I Improve my Credit Score?
Once you are aware of your credit score, what it is and what affects it, you should consider best practices for improving your credit score. Having every aspect of your financial life contained in one significant report might seem ominous and daunting. In fact, it means that you can improve your credit score through good practices throughout your financial life from many angles.
There are a number of well-established ways for improving your overall credit score:
- Not taking out unnecessary loans
- Only possessing and using a reasonable number of credit cards (2 – 3)
- Closing old, dormant accounts and credit cards
- Paying off any loans and contracts or obligations as quickly as possible; preferably early
- Making sure your details on your credit report are up to date (personal details, address, contact details)
- Avoiding County Court Judgements (CCJs) and defaulting on any payments
Avoiding a Bad Credit Rating
The easiest way to make sure your credit score is sound is to simply avoiding the practices that will lead you to damage it. By avoiding the bad practices, you will naturally be swayed towards the better practices and will be on the way to securing yourself a positive credit score and therefore better chances of acquiring loans and other financial services.
A bad credit rating can be worsened by the following:
- Taking out many unnecessary loans and credit cards
- Not paying your loan obligations on time
- Only paying off the interest amount of a loan or card
- Applying for and taking out many credit cards all at once
- Not removing any ex-partners from your credit file (meaning their credit behaviour affects your report negatively)
It is of paramount importance to keep in mind though that if you can avoid taking out any loan or finance package; perhaps by borrowing from friends or family, this is always desirable and less risky and less likely to impact your credit score.