Your credit score is extremely important when it comes to getting great offers from banks and accessing loans with very small monthly interest rates. This value affects every loan, mortgage, and deal that you make with companies who report their financial activities to any of the main credit reference agencies in the United Kingdom.
This having been said, one of the most important things to keep in mind when it comes to credit score is the fact that you must build it up over time. You cannot buy extra points or improve its status in a short amount of time. Those who want to have a great score and be able to access great loan offers and mortgages will have to have a healthy financial life.
How to improve your credit score?
Here is what this means:
- Limit your use of credit applications
There are thousands of credit applications that compete in order to bring you the most attractive offers. Unfortunately, every time you take advantage of their services, you damage your credit score. This is because these transactions are marked up in your permanent financial records.
When a lender considers if you should receive a loan or not, he will come across the times you use credit and conclude that you need it in order to pay for your daily and weekly expenses. This will lower their trust in your ability to effectively use the funds that you borrow from them.
If you are in a difficult financial position and need to use credit, try to space the applications out as much as possible. A good rule of thumb is to apply for a single one every 6 months.
- Close all accounts that you do not actively use
By closing all the accounts that you no longer use you show lenders that you do not need to have a lot of credit for day-to-day operations. This means giving up all the credit cards that you do not use, regardless of how good the offers behind them may be.
Only keep one or two credit cards and try to use them sparingly. If you ever have to use them, try to utilize the same one every time, so that the records will show that the other one is dormant.
- Stay clear of delinquent or defaulted accounts
Delinquent accounts appear when you are regularly late with your payments. The defaulted ones are when you miss several payments and the bank ceases communication with you as a result.
Both of these are huge red flags for any creditor and having even one of them can seriously damage your credit score up to the point where some lenders may restrict you from certain services permanently. These can be “repaired” by talking to the bank and paying any outstanding debts that you may have but they will leave permanent marks on your financial records.
- Never borrow more money than you can afford
Going into debt can lead to County Court Judgements and even bankruptcy. These will signal lenders that you are unable to make reasonable decisions when it comes to how much money you loan or how you use it. Generally speaking, issues such as these can remain on your financial records for up to 6 years, during which they will keep your credit score from improving.
- Make sure that you are not a victim of fraud
Check your financial records periodically and make sure that there is no suspicious activity that may affect your credit score. If you owe large amounts of money without knowing where the debt came from or receive news of applications that you did not make, you may be a victim of fraud. Report this activity to the authorities and the bank in order to protect yourself from their consequences. Furthermore, work with your bank in order to find better ways to secure your accounts.
Keep in mind that if you can prove that your credit score has deteriorated as a result of you being a victim of fraud, your lenders will be able to repair the damage and prevent the issue from occurring again.
This does not put a permanent mark on your financial records, however, it can have a serious impact on the short term, especially if you are not aware of it.
Follow the tips that we’ve presented above and pay attention to your financial activity. Try to eliminate all the accounts that you no longer use or need and always go to the bank or the lenders if you detect any sort of suspicious activity. For the most part, using common sense when it comes to credit applications and staying out of trouble should be enough to keep your credit score growing.