Welcome to the one stop FREE shop of some tips to improve your credit score.
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Make all payments on time
Make all payments on time, without fail - even if you were held at gunpoint. Pay it on time even if you need to borrow to do so! Late payments or worse (defaults) will kill your credit rating for a long, long, long time - 6 years to be more precise. This is what lenders use to work out how likely you are to repay a debt on time. Lenders are not likely to accept you if you have poor credit history - so your chances of getting the latest games console with a personal loan is next to nothing because they don’t trust you to repay it.
Get a credit card and never use it.
You heard that right. Get a credit card and never use it.
Part of your credit score is based on having credit and showing you have control. If done strategically, an unused credit card can help your credit score, rather than hurt it. Lenders want to know you have access to credit, and don’t use it, and part of your score will be based on what ‘available’ credit you have, as a percentage. For example, if you have a £1,000 limit credit card, and you’re using £990 of it, you’ll flag up as using 99% of your available credit, which will hurt your credit score.
Don’t bother with savings
Don’t even bother thinking of savings until you’ve paid off any debt you have. Interest will keep mounting up and up and up meaning that you owe a lot.
However, if you haven’t already created an emergency fund, then do so. Keep up with the minimum debt repayments at least or your credit score will go down the toilet and start a fund in case any emergencies arise - this means that you can cover a few months of expenses just incase anything happens - you don’t want to be drinking out of puddles because you don’t have any money saved up. Unless you like puddle water, then go ahead.
Debt is OK
Some debt is OK - you can still have an excellent score with credit cards, loans etc. Your credit score isn’t as much about how much you borrow, but what type of credit you get and your management of it. Take calculated risks and you could make even more money.
Having a good credit rating is crucial - it gives you significant savings on Interest Rates on Big-Ticket loans, insurance discounts, more housing options and access to better credit cards etc.
For the businesses we deal with, if they need to borrow (for their business), it all comes down to their own personal credit rating. We’ve seen businesses at a stand still and can’t move forward because they got a default for not paying their water bill on time 4 years ago. Always pay on time - be like Martin Lewis and try to pay it off IN FULL at the end of the month or keep utilisation low.
Be on the electoral roll
Be on the electoral roll. It allows any interested party to confirm that you are who you say you are, and that the details you have provided are accurate - this means that it’s more security in terms of information - eg identity theft.
Manage your Credit Rating
Manage your Credit Rating each month - pay for experian or clear score - it’s worth the small fee each month, as you’ll be able to see exactly what you need to do to improve your credit score.
Your credit score is very important. It gives you an idea of how companies may view you when you apply for credit. A higher credit score means lenders see you as a lower risk and it’s more likely for you to be successful with applications. So, a good score will be great news for you if you're hoping to get a new credit card, apply for a loan, or even a mortgage.
Protect against fraud
For starters, make sure your personal address is not listed on Companies House - most of our clients use our address.
Fraud and/or identity theft can ruin your reputation to lenders as being a reliable borrower - this is gutting, especially if you have worked so hard towards getting an excellent credit score. Never give your pin to anyone (even your cat) or let your card go out of sight; if not, then store in a secure place (Especially since June 2020 when contactless payments have increased to £45.00 per transaction).
Also, never give away details on cold calls or emails - it's likely to be a scam. Claw away at cashpoints (ATMs) to ensure that they have not been tampered with or are fitted with cloning devices - you don’t want to be paying for alcohol for a thief. It may be worth investing in a RFID blocking wallet - this protects cards against being cloned with machines. Always check your bank statement to identify if any unauthorised transactions have occurred, and contact your bank immediately. You might want to check with the other half first though, in case they have been on a spending spree for you.
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