Your credit score is a number that banks and other financial entities use to classify you. This number expresses how reliable you are to their eyes so they know if they can lend you money. The higher the score, the lower the risk. This number is calculated by credit reference agencies, which are commercial companies that gather information about you from different sources. The credit score is the number that results from your credit report these agencies prepare. A key chapter of this report is your credit history. (More on credit agencies and how they work, here).
In other words, your credit score is crucial to determine your success in applying to credit cards, loans, overdraft conditions, mortgages or other financial products and services. Here at Savewallets we have researched some ways to improve your credit score, pay lower interest rate and get access to better loans, as well as other benefits. This is not an exhaustive list, but it’s a good way to get started.
Check your credit score
First things first: review your credit report to see where you stand. Also, be sure to check for any mistakes or missing information. You can do this for free through different sites like ClearScore, Noodle and Experian’s CreditMatcher.
Five ways to boost your credit score:
Any unused credit accounts? Close them!
Sometimes, having a large overall credit limit can end up affecting you, if you are not using it. Close any accounts you might have opened and no longer need. Simplify things and get better control of your financial products.
Register to vote!
Be sure to be on the electoral roll. Apart from being engaged in the future of your council, borough, city and country, it improves your credit score. It’s so easy and helpful. In the UK, you can check your electoral status on Your Vote Matter site. You can register to vote in the UK here. Why does this help your score? Well, the fact that you appear on the Registry makes it possible to confirm your identity and details, thus reducing the risk of fraud.
Also, if you are an immigrant and your nationality permits it (for example, if you are a EU citizen living in the UK) you can register to vote in local elections too. This is great, actually. If you are going to be paying taxes like council tax, for example, you might as well have a say on who the Mayor is, right? Another benefit of registering to vote is that it helps you boost you credit score. Wins on both fronts!
Make all your payments in time; don’t exceed your credit limits
Make a point of meeting deadlines. Failing to pay makes you less reliable to the eyes of financial organizations. Remember to schedule your taxes and credit card payment. Be on top of it! Keep an eye on your credit limits and be sure not to exceed them. Your goal is to look trustworthy and reliable.
Check your overdraft conditions
Check your bank account frequently and be sure to know what the overdraft conditions are. This will also help you monitor the interests and penalties – and excess payments. Avoid these by signing up at Savewallets as we track your account balances and alert you when they are low! That too, at no extra cost!
Work to build a credit history
Building your “financial profile” can take time. Unfortunately, it is not as easy as opening an Instagram account. You can do this by opening new credit accounts and meeting the payments (watch out: don’t overdo this! Remember not to have too many unused credit accounts). Spend more than the minimum, but don’t exceed your credit limit. If possible, keep your expenses well below the limit. Other ways to build your credit history are: having credit cards (ask your bank!), pay your rent and utilities on time (ask your landlord to report this to credit bureaus!), co-sign a loan with someone with good credit history, and pay student loans on time.
Remember: your credit score does not reflect all these automatically. It can even take 60 days for your credit score to be updated.
All in all, stay on top of your credit information, bank accounts and payments. Then, start building your credit score and keep an eye on it. It can take time, but even if you are not looking to ask for a loan any time soon, it can be extremely useful in the future, and for that you need to get started early.