5 Ways To Boost Your Credit Score... And The Benefits
Having a good credit score is essential if you are to progress through the stages of wealth, but for some, that only becomes apparent right in the face of a large financial hurdle.
Whether it be online, in newspapers, magazines or on television… the personal finance world will offer you a plethora of ways to improve your credit score. Many of these are fantastic and absolutely essential, but I feel the emphasis on why you should be following these tips is often understated.
An excellent credit score can…
Top 5 Tips
1) Make Regular, Timely Payments
Paying accounts such as your energy bills, mobile phone contract and your broadband both on time and in full each month will show any potential lenders that you would be a reliable borrower. It demonstrates the ability to handle credit in a responsible manner and, of course, will boost your credit score. This principle is the bear minimum if you are to really pursue an excellent credit score.
2) Keep Credit Usage Low
By this, I mean don’t use up too much of your credit allowance. How much is ‘too much’ I hear you ask? If you have a £1000 credit allowance for a particular account then try to avoid owing more than £300. This is the 30% credit utilisation rule in full effect. So long as you keep your utilisation below 30%, having these credit accounts (as long as not overdue!) can positively impact your credit score. Do, however, be wary of utilising 0% of your credit as this can actually negatively impact your score!
3) Don’t House Hop
Firstly, I acknowledge this isn’t easy for everybody. I for one have had a change of address 3 times in the last 2 and a half years and have seen the moves directly affect my credit. However, if you can avoid moving home too often then this will only benefit your credit score. It may seem a little harsh and, more often than not, the reason for you moving will not be related to your financial situation but, unfortunately, lenders are not ones to take risks and may perceive somebody who moves house often as somebody who struggles to pay rent and keep up with the bills and thus has to move to stabilise their financial situation.
4) Avoid Excessive Hard Searches
There are two types of searches; a soft search and a hard search. A soft search can be done by yourself, often using an app such as Experian, but may also be done by your current banks and lenders to see if you are eligible for any potential offers. If ever a bank or business makes you aware they are going to do a credit check then make sure to ask whether it will be a soft or hard search as a hard search can impact your credit score for up to two years! Credit card applications, mortgage applications and any other new credit applications will require a hard search to be carried out so be sure to consider this and weigh up whether it is worth it. Avoiding these hard searches as much as you can will ensure your score remains intact for when that all important, necessary hard search scenario arises… AKA buying a house!
5) Utilise Credit Builder Cards
A credit builder card can help build up a low credit score or rebuild a credit score which has taken a hit. Typically, a credit builder card will have low spending limits and high interest rates. The best way to use a credit builder card is to use it regularly, each month, but only on small essentials that you would be buying anyway regardless of owning the credit builder card. Then the aim is to pay that balance off as quickly as possible and in full in each month. Keep this up for 3-6 months and your score will begin to improve! Along with this, following all 5 steps will, in time, set you on track to an excellent credit score which can only open up doors for you.
Until next time,