Anyone applying for a mortgage, loan, mobile phone contract or any form of store credit will be aware of the importance of having a good credit score. Your credit score determines whether your application is successful or not. The higher your credit score is, the better chance you have of being able to access the finance you need at an affordable rate and with lower interest rates.
How Your Credit Score Works
When you apply for any type of loan or credit the lender will assess your suitability. They do so by looking at three things – your previous borrowing record, your application form and their own records. These may show whether you have already been a customer. They will also, of course, look at your income.
Credit scores range from 0-999. Any previous history of defaulting on payments will give you a low credit score. Subsequently, a good record of managing your finances and always making payments on time adds points to your score.
Tips To Improve Your Credit Score
Here are our tips on how you can improve and maintain a high credit score and get the low-cost finance you need in 2023.
Pay Off Your Debts
It can be all too easy to forget payments, especially when you’re focusing on your work or your family and your finances are being squeezed. Many people are facing this today with the cost of living crisis coming on the back of the Covid 19 pandemic. The biggest debt for many is often a credit card debt. Some will have multiple credit cards to pay off, and when you pay only the minimum each month the debt never goes down. If you have multiple cards look at combining them into one card. Then you can see clearly the size of the monthly payment. If you can afford to make more than the minimum payment this will allow you to pay off the credit card sooner. Set up a direct debit or set payment reminders to help you pay on time.
Open a UK Bank Account
If you do online banking with banks such as Starling or Monzo, or any other off-shore bank consider opening a UK bank account. This will help your credit score by allowing lenders to verify your residency, helps you to manage your money better and can prove your stability to lenders.
Create a Credit History
Ironically the best way to get credit and achieve a good credit score is to add information to your credit history report. You can do this by, for example, asking your bank for a small overdraft limit on your account. Just make sure you don’t use it as an overdraft can be expensive.
Put Bills into Your Name
Putting household bills into your own name helps to build up a credit history when utility companies and such like share your data with credit reference agencies. Make sure you always pay by direct debit wherever possible.
Finally, make sure you regularly check your credit score with agencies. It’s not unknown for mistakes to be made and an inaccurate credit score to be registered.
