What you need to know about improving your Credit Score

With so many areas to keep track of, personal finance is becoming increasingly difficult to manage.

A major part of modern personal finance involves your credit score. Now, you may be wondering what a credit score is and how to monitor it, but once you’ve got the initial introductions out of the way you need to know how to improve it.

Have these areas covered to keep your credit score sky high.

Pay your bills

First and foremost, pay your bills on time.

Forgetting a payment just once is enough to put a dent in your credit score, meanwhile your landlord or energy supplier may report you to a credit agency if you’re late on your rent or utility bill.

Worse than that, any outstanding County Court Judgements (CCJs) for debt will have a massive impact on your credit score for a long time, so setting up a regular direct debit for any bills is a good idea to avoid a payment slipping through the net.

If you do get a CCJ, pay it off in full as soon as you can. Any CCJs paid off within a month will be completely removed from the court register, thus not affecting your score.

Getting a credit card

Credit cards can be a blessing and a curse when it comes to a credit score, so know what you need to do with one before you get it.

  • Don’t avoid them altogether. Credit cards, especially for those with poor credit, are a great way to build trust and your rating.
  • Don’t apply for too many at once. These ‘hard inquiries’ can negatively affect your score.
  • Credit utilisation. Get an understanding of this and try to keep your utilisation to below 30%.
  • Think twice before cancelling old cards. It can affect your total credit-to-utilisation ratio and credit age.

And of course, pay in full and on time.

The lesser knowns

There are also a few more obscure elements that could help you:

  • Register on the electoral roll. It’s much harder to get credit if your name isn’t on there.
  • Check your credit file for mistakes. Even an incorrect address could affect you score.
  • Links to others. You will be affected if your credit is linked to a spouse, friend or family member’s rating and they have a poor score.
  • Moving home regularly. Lenders feel more comfortable if you’ve lived at one address for a long time.

Getting and maintaining a good credit score is a balancing act that you’ll do well to perfect immediately, but it’s a great help along the way to staying on top of your finances.

A lot of these suggestions can be acted on straightaway — so whatever your score, a better credit rating is never too far away.

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