How Do Brits Improve Their Credit Score?
Let’s talk about how you can improve your credit score… that said, before you start working on your credit score, it is vital that you understand the main differences among various credit reference agencies. This will help you know the type of information they are likely to examine, and what they would consider a good or bad credit score. In this guide, you will find everything you need to do so that you have a good credit score in Britain.
1. Limit Your Credit Utilisation
This is the proportion you use of your stipulated credit limit. For example, if your limit is £4,000 and you have already used £2,000, then your credit utilisation is 50%. Most of the time, if you can spend a lower percentage, most companies will see it positively and give you a good score. It is advisable to try not to exceed credit utilisation of 25%. You can get more details by visiting www.experian.co.uk/.
2. Make Payments Reliably
Missed or late payments are not good for your credit score because they can stay there for as long as six years. Understandably, you can make late payments due to inevitable circumstances. But you can do something to escape the possible dangers that might ruin your credit score.
3. Reduce Credit Applications
It is never a good idea to apply for credits within short periods. This habit might strongly convince lenders that you are overly reliant on credit, hence harming your overall score. It does not depend on the type of credit you are pursuing or the amount you want to receive from the lenders. Every time you apply for credit, a thorough search will be initiated on your search, and all lenders can always see the details.
4. Build Impressive Credit History
It is good to show that you always repay on time and try as much as possible to stay within the credit limits. That way, lenders will see you as a responsible borrower. Unfortunately, if you have never borrowed any money before, you will somehow struggle to access loans and credit cards, especially when you consider those with low rates.
In this case, the best solution is to go for a credit card designed to help you build a good credit history. APRs tend to be slightly higher since these credit builder cards are meant to serve customers at higher risks.
5. Disconnect Ex-Financial Partners
Once you have taken a joint bank account or joint mortgage, you are automatically linked to the person for that debt. However, if their credit rating is bad, yours might also be affected. If you have separated with your spouse, or the joint financial product you took together is no longer valid, stay safe by updating your status on a timely basis.
Why Should I Improve My Credit Score?
Every time you apply for credit, the lenders will review your credit score to decide whether to lend you. Note that based on the details they can access; companies use different methods to calculate your credit score. If you have a good credit score, you will enjoy things such:
- Low-interest rates
- Higher credit limits
- Access to additional offers
What Should I Avoid?
Companies will always review your credit report, and when they do, some financial behaviours become accessible. Therefore, you must avoid certain things to avoid having negative reports on your credit. Here are some of the things you must avoid:
- Being at your credit limit
- Frequent credit application
- Setting up new accounts frequently
- Applying for credits worth more than you can afford to repay
- Missing payments
You risk hurting your credit score badly if you make any of the mistakes mentioned above. Talk to your financial advisor if you feel that your credit score is already affected because you made one or several of the mistakes listed. They will advise you on what can be done to improve your credit score within a given duration.
Your credit score is only as good as your borrowing and repayment habits. Once you have successfully applied for credits, make sure to have a good repayment plan in place. Also, you should only borrow money if you have to. Frequent borrowers normally give lenders a terrible impression that can adversely affect their credit score. You can also keep your credit score safe by only borrowing what you can afford to repay, and paying off your credit as soon as you can. It is not good to wait until lenders start coming after you.
About Mike Coady
Mike Coady is an expat expert based in Dubai and is on hand to help with all of the above and more.
Mike is an award-winning money coach and industry leader in the financial sector.
Qualified to UK Financial Conduct Authority (FCA) standards, a member of the Chartered Insurance Institute, a Fellow of the Institute of Sales Management (FISM), a Fellow of the Association of Professional Sales (F.APS), a Fellow of the Institute of Directors (FIoD) and featured as a highly qualified Financial Adviser in Which Financial Adviser.
To learn how to choose a great financial adviser, download our free guide.
Blog published by Mike Coady.