A credit score must be protected and nurtured to enable you to get the best possible loan deals and save yourself money. If yours is not where you would like it, then consider applying our 7 tips to improve your credit rating.
In this article about 7 ways to improve your credit rating we shall examine:
- Why a credit rating matters
- Managing your credit cards
- Rectifying mistakes
- Breaking ties with ex-partners
- Keeping up with repayments
Why do I need to worry about my credit rating?
Your credit rating is the most important measure that lenders have to judge your creditworthiness in order to assess the risks involved when lending you money. Having a low credit score can intimidate people and even make them push it into the background and not deal with it. You could be paying way over the odds for any personal loans, credit card deals and even your mortgage when the time comes to borrow money. Pay squeezes and high inflation mean that the average person needs to be getting the best value for credit that they possibly can, so what are you waiting for?
1. Keep credit card balances low
One of the most important factors that determine your credit score is the ratio of how much credit you are using to how much revolving credit you have available. The ideal figure here would be 30% or lower. It is important to try and pay down balances and keep them low. You could further help your credit score by getting a personal loan to consolidate the balances and get rid of the credit cards that you no longer need.
2. Check your credit rating for mistakes
The information that credit rating agencies hold about you needs to be checked at least once a year to make sure that there are no mistakes. If you see something that causes concern you can contact the main credit rating agencies so that they can investigate and rectify the mistake. During this period, lenders will not be able to see your credit file.
3. Make sure that you are on the electoral roll
When lenders are checking a borrower’s address they look at the electoral register to confirm it. Any changes of address need to be updated or if you are not registered then it is a good idea to do so. You can contact the register to vote website here.
What have we learned so far?
- Lenders judge your creditworthiness by viewing your borrowing history through your credit file
- A good credit rating will get you the best credit deals and save you money
- Keep credit card balances low or consider consolidating the debts
- Make sure there are no mistakes on your credit file and correct them if there are
- Keep the information on the electoral register up to date or register to vote if you have not done so
4. Don’t apply too often for credit
Ask lenders to perform “quotation searches” as opposed to credit searches that will give you an idea of the cost of the borrowing but not leave a footprint on your credit file. Applying too often for credit for things like short term loans and payday loans can indicate to lenders that you are reliant on credit or are having financial problems. Do not apply right after a life change, such as a new home or job, as this can indicate a lack of stability to a lender and make them reluctant to lend.
5. Do not draw cash on credit cards
Drawing money out on your credit card could make a lender assume that you are short of money and not managing your finances correctly. The exception to the rule is for ATM withdraws when travelling abroad.
6. Terminate financial partnerships with ex-partners
A partner’s circumstances cannot affect your credit rating unless you have a joint financial product such as a bank account together. Lenders can sometimes be reluctant to lend to an applicant in case their ability to repay is affected by their partner’s circumstances. If you are no longer with a partner who did not have a good credit score it is important to make all 3 credit rating agencies aware that you are no longer associated with them and to break any links.
7. Pay your bills on time
No matter how small your repayments may be, paying on time and making an effort to pay down debts can have a very positive effect on your credit score. Missing payments will not make you an attractive prospect to future lenders.
What can we conclude about 7 ways to improve your credit rating?
By trying to manage your credit cards, paying bills on time and not applying too often for credit you can start to repair damage to your credit rating which will make it easier to borrow and save you money by getting the best deals.