Building a good credit score is imperative because it determines your ability to borrow money, get loans or access financial products such as credit cards. A poor score, on the other hand, may lead to declined loans and cards. Lenders use this score as a parameter to judge your financial stability and reliability because it shows how much you already owe and whether you will be able to repay it comfortably. So it becomes critical to pay attention to this number and makes sure that you have a good history to be high on this score.
Surprisingly, your credit score can change over time as your financial circumstances change. Moreover, it may also vary from lender to lender as the formula they use to calculate it differs slightly. Your aim should be to keep an eye on the score and make sure that it stays on the higher side so that you can borrow funds with ease. Here are some useful tips that you can follow to step up your credit score.
Check your credit file
The initial step recommended before applying for any type of loan is to check your credit report. You can access your score online or request the full details of your file for free. Every piece of information on the file should be accurate because the slightest error can bring down your score. If there is any erroneous information listed therein, make sure that it is removed or corrected.
Get on the electoral roll
Though it sounds surprising, getting on the electoral roll actually enhances your credit score. This is because the lenders and reference agencies rely on this parameter for making verifications and background checks. Your credit report should have the correct address. Living at the same address, holding the same bank account and working with the same employer for a considerably long time period improve your chances as well.
Pay off your debts
If you want to improve your credit score, paying off your debts really helps. And when you do pay off, try to repay more than just the minimum required payment. This gets a positive impression on the lenders as it indicates that the debts are being managed well. Ted MacDonald from 1st UK Mortgages says that if you have a bad credit history, one thing you can do to help get you approved for a loan is to show that the debts are being managed now.
Do not miss or get late with repayments
If you are missing your repayments or getting late with them, expect your credit score to drop down. Not paying utility bills on time can also land you in trouble. To make things worse, these late or missed repayments can show up on to your file for years. Even if you do miss or get late due to some uncontrollable circumstances, connect with your provider and convince them to get the black mark removed from your file.
Dissociate from your financial partner
Being financially linked with another person is also risky for your credit score, particularly if they have a bad rating. This usually happens if you have a joint banking account or a joint mortgage with a spouse or business partner. If you are no longer with them, make sure that you dissociate officially and pass on the information to the reference agencies as well otherwise you may end up paying for their dealings.
Close unused credit accounts
While lending out money to you, lenders not only consider the amount you owe in debts bit also the amount of credit that you have access to. So make sure that you close all the unused accounts such as store cards, credit cards, and mobile contracts. Besides cutting up the cards, get in touch with the providers to close the accounts as well.
Use a credit card to build your history
Ironically, not having a credit card can lower your score because lenders have no way to access your history. Getting a credit-building credit card is a smart move to build on the score. Use it to make some purchases every month and repay the balance at the end using direct debit. This indicates responsible debt management and has a positive impact on your credit score.
Besides following these tips, keep an eye out on frauds because the fraudsters out there hunt for victims and attack them with identity impersonation. This can hit your credit score pretty badly. Since this score is of such importance, you should take all measures to preserve and improve it.
