Your credit report is the first point of call for lenders if you decide to apply for a credit card, a loan or any other form of credit. It doesn’t take much to send your credit score into decline, but there’s many ways to improve your credit score and become more attractive to lenders.
I’ve put together some simple tips to help you on your way to improving your credit score and getting a little more love out of life.
1. Pay Your Bills On Time
When lenders review your credit report, they’re interested in how reliably you pay your bills. Staying on top of payments consistently can improve your credit score over time.
2. Pay Attention To Your Credit Utilisation Ratio (CUR)
Your Credit Utilisation Ratio is calculated by adding all your credit card balances at any given time and dividing that amount by your total credit limit. This gives you a clear idea of the amount of credit you’re using.
To work out your average Credit Utilisation Ratio, look at all your credit card statements from the last 12 months. Add the statement balances for each month across all cards and divide the figure by 12.
For example, if your statement balances for the year add up to £5000 and you divide this by 12, your average monthly credit use is £416.
Lenders typically like to see low ratios of 30% or less.
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3. Don’t Cancel Unused Cards
Cancelling unused credit cards can negatively impact your overall Credit Utilisation Ratio. Instead, use them to improve your credit score with my next tip!
4. Use Your Credit Card Little & Often
Instead of cancelling your credit cards. Try to use them to make small purchases often. Keeping your credit card active in this way makes you more attractive to lenders when you’re paying off your bill each month. This can also increase your credit score over time.
5. Avoid Making Muliple Applications In A Short Time Frame
When you make an application for credit, a ‘hard search’ is carried out on your account and a mark is left on your credit report. Making too many applications in a short space of time can negatively impact your credit score, because it appears to lenders that you are desperate for credit. Resist the temptation to apply again if you’ve recently been rejected, and focus on improving your score before trying again.
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6. Use An Eligibility Checker
When you used an eligibility checker, a ‘soft search’ is carried out on your account to see if you’re eligible for the product you want to apply for before actually applying. Lenders are able to view some of your information, and the search doesn’t impact your credit score.
This lets you know whether you’ll be accepted or rejected for the product or service you want to apply for without damaging your credit score in the process.
7. Check Your Credit Score Regularly
Checking your credit score regularly allows you to make sure all information is correct and up to date. Mistakes can lower your credit score more than it should be, so it’s important to double check all your information.
8. Get On The Electoral Roll
Being registered to vote means that credit agencies are able to verify who you are. This makes you appear more stable to lenders.
Improving your credit score is essential for various reasons. If you aspire to get a mortgage or to secure a personal loan, then lenders take your credit report as a sign as to whether you will be able maintain your payments or if they’re not the right credit agency for you.
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