Ask the Expert: How can I boost my credit score?
Loan.co.uk’s financial FAQ series continues, with the aim to help educate consumers, allowing them to make informed choices on their spending decisions.
This week’s post takes a look at ways to positively impact your credit score.
Q: How can I boost my credit score?
A: There are several different ways that you can positively impact your credit score: some of which only take a short amount of time.
As we discussed last week, a credit score is calculated from a number of factors, whether you have made your credit payments on time in the past is a big one, as is the type of credit you currently have and have had (e.g. mortgages, loans, credit cards etc). The length of your credit history (including the age of your oldest account and the average age of all your accounts) also has a big impact on your score.
As each application for credit will be recorded on your credit file, it’s important to review yours before you ask for any major funding – that way you can see if there are any mistakes or if you need to try to boost your rating before you apply.
Even if your credit score isn’t fantastic at the moment, don’t worry, your score can and will change throughout your life, and there are some simple things you can do to boost it:
Register on the electoral roll
One easy way to boost your credit score is to make sure that you are on the electoral roll at your home address: many companies use this as a way of preventing against identity theft. Therefore, if you are not on the roll, it can seem as if you are not being transparent and that you don’t have a credit record.
Registering is worthwhile and the form should take less than 10 minutes to complete.
Pay by direct debit
It’s important to pay your credit on time: not doing so will create a negative on your credit file and will undoubtedly reduce your score. Every missed payment will show up on your full credit report.
By setting up direct debits for your loan repayments, credit cards and any other monthly or quarterly payments, you will make sure that the payments are made on time – but also make sure you have enough money in your account to pay them, as going in to unarranged overdraft will negatively impact your score.
Close down old and unused accounts
Lenders look at the total credit amount available to you, not just what is owed. Therefore, if you have too much credit available to you, this can have a negative effect on your rating.
Closing down any old accounts, credit cards or store cards you don’t use any more will sort this problem. It also shows that you are on top of your finances on a regular basis.
It’s worth having a check every year or so to see how many accounts you are still using, and how much you have on each.
Check into your partner’s score
If you have a joint mortgage, or even a joint bills account with a flatmate, this could negatively affect your score.
If your partner, friend or flatmate has a poor credit history, it’s worth keeping your accounts separate.
Also remember that if you split up with your partner (or roommate!) you should split up your finances as well. Once you have, you can write to the credit reference agencies and ask for a notice of disassociation to make sure that your ex’s credit history no longer affects yours.
Don’t apply for credit too often
Every time you formally apply for an account or credit, from a credit card to a contract for a mobile phone, a ‘footprint’ is added to your credit report. If you apply for several pieces of credit in a short space of time, it can be interpreted by a lender that you are having problems or are being irresponsible with your finances.
If you can, try to leave at least three months between each application for credit, or if you are shopping around make sure that the lender or credit provider uses a “quotation” search – this will indicate to others that you are looking for the best deal – and not just applying for multiple loans!
Reduce the amount you owe
It probably seems obvious, but reducing the amount you owe will help push your credit score higher.
Trying to keep credit card debts below 50 per cent of your credit card limit will help, as will paying more than the minimum monthly payment.
I hope this information helps you. If you follow these simple tips, and keep a regular check on your credit report, you should be able to boost your score.