Cards and Loans

Simple Ways To Improve Your Credit Score

As an adult, there are so many things which are linked to having a good credit score, but there are many people who don’t know their credit score or even how they can improve it. Yet, everyone should prioritise boosting their credit score for the future! Luckily, there are plenty of ways that you can do this. From registering to vote to using credit cards safely, you have many different options that can help you to build your credit score and work towards your future!

What is a credit score?

Your credit score is a three-digit number which shows companies how reliable you are when it comes to borrowing and repaying money and loans. Having a good credit score is important when it comes to things such as credit cards and loans, but most importantly if you are applying for a mortgage. Having a higher score is good, as it means lenders will view you as low risk and are more likely to approve your application.

Having a higher credit score also helps to boost your chances of getting approved for the best rates and products when it comes to financial services and interest rates, such as with credit cards, loans and mortgages. If you can, it is always worth trying to work on and improve your credit score and make it so that you are more likely to be approved for things in the future, especially if you are wanting to buy your first home.

How is a credit score calculated?

Each lender and company is looking for different things when it comes to their potential customers, so whilst your credit score might be attractive to one lender, it doesn’t mean that others will accept your application. There is no magic number when it comes to your credit score, but generally speaking, the higher your score, the better. However, there are a lot of myths surrounding credit scores, which puts people off from improving their score, or worse, makes them think that they are doing things right, when actually they are damaging their score, so it is important to get clued up before you make a start.

On average, credit scores are rated from 0-999 and a good score tends to be between 881 and 960, whilst a fair credit score can be between 700 and 880. Before you apply for any credit or loan, you should always check your score and make a note of any recommendations or warnings associated with the final figure. There are a number of free credit score tools available online, but if you want a more in-depth look at your credit file and score, then some companies will ask for a fee to look into this for you.

When you apply for credit, the lender will look at the information stored on your credit report and application form. This data is then used to calculate your credit score, but it is important to note that every lender and company has different way of calculating this figure, based on the information they have access to. If you have a bad credit score and are worried about what this might mean for your future, then there are some really easy and simple ways in which you can increase your score and overall chances of being accepted for credit and loans.

Register to vote

Registering to vote using your current address helps companies to confirm your identity. It is also seen as a sign of stability, but the reason as to why it can help to improve your credit score is because it allows a number of interested third parties to confirm that you are who you say you and that the details you use when you fill out a form or document for credit or loans are accurate.

When it comes to your details, it is important that lenders are able to confirm that you are who you say you are in order to avoid issues such as identity theft and fraud and the more that lenders have in terms of secure information, the more confident they are when it comes to lending money.

Checking that you are on the electoral register is one of the easiest ways to improve your credit score, but there may be some reasons as to why your information may be missing. If you have recently moved house or choose not to vote in elections, then your information may be incorrect or missing, which can impact your credit score. It is estimated that having your details on the electoral register can boost your credit score by around 50 points, so is well worth doing if you are considering an important financial decision in the near future.

Use a credit card

Contrary to popular belief, using a credit card is one of the best ways to build your credit and improve your credit score, so long as you use it correctly and sensibly. If you want to build a good credit score, then use your credit card little and often and make sure that all your payments are made on time.

In order to start building credit with a card, then you will need a credit card of your own, or become a user on someone else’s card. However, if you have a poor or low credit score, then getting accepted for a credit card can be difficult, but there are options available to you.

Secured credit cards

Secured credit cards are often used as a stepping stone when looking to improve or build your credit score. Secured credit cards work just like normal credit cards, but you will have to pay a refundable security deposit to your card issuer when you open the account. Secured credit cards often have higher fees and don’t offer many cardholder benefits, but by using responsibly, they can help you to qualify for better and more suitable credit cards in the future.

Ask friends and family to add you as an authorised user

Having another person’s card as part of your credit score and history can help you to build and improve your credit score, so long as the primary user is responsible with their card. Your credit score may be impacted if the cardholder doesn’t make their repayments on time or uses a large percentage of their credit limit. You can ask trusted friends and family members to add you to their credit card as an authorised user and, when they do, the credit card company can report the account as being under your name too.

Avoid making multiple credit applications in a short period of time

Each time you apply for credit, whether it is on a store card or as part of a buy now pay later scheme, then a search is carried out on your account and this is marked on your credit score. There are two different kinds of checks which can be carried out, soft and hard credit checks, and these have different impacts on your score.

Hard checks are done when a lender, with who you have applied for credit, reviews your credit report as part of their decision-making process. This type of check will appear on your credit score and influence your credit score in the future. Soft checks are where either yourself or a lender checks your credit in relation to an offer, or to preapprove you for what you have applied for. These checks do not appear or impact your credit score.

If you make too many applications in a short space of time, then this can have a negative impact on your credit score as it can seem as though you are in desperate need of credit and may not have the means to make the repayments. If you are ever rejected for credit, then resist reapplying multiple more times and wait a while before you apply again. Before you do this, check that your credit report and stored information is correct, as this could be influencing the lender’s decision.

No matter your lifestyle, having a good credit score is vital for a number of different reasons. Whether you are a young adult looking to buy your first home, an elderly person looking to take out a mobile phone contract or even a business owner going through a commercial lease renewal on your premises, your credit score will likely have a huge impact on the outcome of these decisions. Building up your credit score is easy, but does take some time and commitment and it is important that you do it properly.

General tips, such as paying your bills on time, being aware of fraud and having a good overall grasp of your finances and financial situation will all go in your favour when it comes to improving your credit score, as well as your day to day life. So, take a look at your credit score today and see what you can improve – remember, basic checks are free and you shouldn’t pay for a credit score check unless you are requesting more information.

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