Getting the best credit score possible isn’t always as easy as experts suggest. ‘Millennial’ spending, the pressure to keep up with trends and, ironically, the ease of gaining credit means many are falling into debt, hurting their credit score in the process. The good news is that with a bit of work, boosting your credit score is completely attainable. Let’s take a look at how to improve your credit score starting right now, as well as my personal experience of improving my own credit score.
What is a credit score?
A credit score is a 3 digit number which represents the risk that lenders take when you ask for credit a.k.a borrow money from them. There is no universal credit score in the UK – different lenders give you different scores, meaning being rejected from getting credit by one lender doesnt mean that you’ll be rejected by all lenders.
In simple terms, the higher the credit score you have, the more chance you have of lending money, whether that’s a loan, mortgage, credit card, etc. You may also need to pass a credit check for you job or to rent a property.
If you’re not sure what your credit score is, you can check get a free credit report via Clearscore – I usually check this every month to see what my credit report is saying.
What is a good credit score?
As every lender scores you differently, there’s no clear answer. However, with Clearscore, their number is based on your credit report via Equifax, which is rated from 0 to 700. The higher your score, the better your rating. Clearscore suggest a credit score of 420+ is good, with 466+ being excellent.
How to improve your credit score
I’d always been fairly good with money until I got a credit card and overdraft at 18. Fast forward a few years and all my common sense had gone out of the window. After maxing out my overdraft, struggling to make payments on my credit card and having zero cash, my credit score being completely obliterated. These days, I have a great credit score which took several years to repair. Let me tell you, learning how to improve your credit isn’t all hard work, doom and gloom. There are small steps you can start making right now which will put you on the correct path to credit score success!
To achieve the best credit score you can, its important to be super organised with your finances. This does’nt mean you need to count every coin in your purse/wallet – simply making a note of your ingoings and outgoings will help you to get back on track.
I like to write down everything that’s going out of my account each month. To begin with, just jot down your main bills, ignoring anything like petrol and food etc. This will give you an idea of how much you can budget for these things and any ‘treats’.
Additionally, make a note of your income. If you work freelance like me, that isn’t always easy. I normally write down my finances at the beginning of the month with an estimation of my expected income.
Always know the date of when each payment comes out. This way you’ll never miss a payment. Repeated missed payments will cause your credit score to drop so its important that your bills are paid on time.
Cancel unused debt
Got any unused credit/store cards? Cancel them as unused credit can lower your credit score. They can also be the target of fraudsters who can run up large debts if they get hold of your details.
If you want to start paying off your debts, try negotiating your balance. Many lenders are willing to make deals on balances – I know many people who have done this over the years and it works a treat! Simply phone up your lender and offer to negotiate your outstanding balance (note: this only works if you can pay the balance off in one lump sum). If you’re struggling to keep up with paying off your debts, ask if you can set up a payment plan. Many companies will allow you to set up a plan if you can’t make the minimum payment each month. Getting on top of your outstanding debts is a great way to increase your overall credit score!
Extend your credit
To improve your credit score, its a good idea to extend your credit. This may sound ironic, right? But, it really works. If you’re not in a position to pay off all your debts, try extending your credit limit. If you’re current credit card balance is £500, try extending your limit to £1000 – this means your cutting your credit in half! Just make sure you continue to make your monthly repayments.
If you have a sparse credit history, you’ll likely find that you have a low credit score. The best way to build up your score is to start applying for credit. Increasing your credit history will help to buildup your overall credit profile. If you have no/little credit, its best to start with a credit card or phone contract. Don’t apply for too much credit in one go as this will show up on your profile. If you’re thinking about getting a credit card, you can find out your chances of getting accepted via this tool on the Money Saving Expert website. I’ve used this and it really helps knowing whether you’re likely to get accepted or not – a rejection can harm your credit score so do your research before applying.
You could also apply for a pre-paid credit card as these don’t require a credit check for application. Some cards have a monthly fee but these are a great way to potentially help your credit rating.
When it comes to getting the best credit score, don’t sweat it. It takes time to build up a great profile but if you start taking action today, you can make improvements. If you’ve got a low credit score, making small changes like adding yourself to the electoral roll, closing unused credit cards and not applying for too much credit in a short period of time will really help to improve your credit score.