How to build your credit score in 6 easy steps
How to build your credit score in 6 easy steps
Having a good credit score is a big part of your financial life. A three-digit number that determines how likely you are to pay back borrowed money.
It’s pretty simple – the higher your score is, the more likely you are to be accepted for loans and credit cards. You can check your score any time for free online, and it’s always worth doing what you can to keep it in good shape.
What is a credit score
Your score is calculated from the information in your credit file, more commonly known as your credit report. Remarkably, lenders don’t see your score – this is purely for you. The score you work to boost is actually a reflection of what is showing on your file.
The scoring is done by the three credit reference agencies, Experian, Equifax and TransUnion. They all have different methods, so you’ll often find that the numbers are different depending on where you look.
This information is then used by lenders to decide not only whether to lend to you, but how much they can trust you with and how much interest to charge you as well.
If your credit history isn’t quite where you wish it would be, don’t worry, you’re not alone. Building your credit score doesn’t happen overnight, but once you have identified the factors that might be bringing it down, there are steps to bring it up.
Steps to build your credit score
1. Pay your bills on time
A major factor for lenders is how dependable you are in terms of bills. Good payment history shows that you are highly likely to continue this behaviour and be a good risk to lend money to.
Avoid falling behind on payments by setting up automatic payments to pay your credit card, phone bill etc. This gives you less worry about paying them and your credit score will benefit in the long run
2. Don’t max out your limit
Not using your full credit limit is often seen as a bad thing to most, but to lenders, it’s a great thing. Try and keep the use of your credit to about 30% of your limit to show lenders that you can be practical with your money.
You can check how much of your limit you’ve used when checking your report online.
3. Avoid numerous applications in short time spans
Any time you apply for credit, the lender will conduct a hard search on your credit report and this leaves a mark each time they do this. So making several credit applications within a short time span can negatively impact your score because you end up looking desperate for credit
Don’t give in to the temptation to apply again if you are turned away. Give it some time and check that your credit report is accurate to increase your chances
4. Little and often is key
Actively using credit on a regular basis is a key factor in helping to build your score. Using a credit card frequently for small amounts and paying it off each month is very appealing to lenders and gives your score a boost. It shows that you are financially dependable.
5. Be aware of fraud
Fraud is a huge problem in today’s society. Becoming a victim of fraud has a huge probability of negatively affecting your credit score.
Checking your report often will allow you to keep an eye out for any fraudulent activity. You can spot early signs of fraud by looking in the searches section, which will show you all the hard searches done in your name.
If you notice a search that you are unsure of, contact the lender to check first before reporting it to fraud authorities such as Action Fraud.
6. Fix any errors
In order to keep your credit score accurate, the information on your credit report needs to be accurate. Errors on your report can often result in your score being lower than it should be.
Thus another benefit of checking your report often is that it allows you to spot any of these errors and correct them as quickly as possible.
Keeping your credit score in good shape is a vital part of your financial life, so it’s important to do everything you can to keep it that way. Check your report and score frequently to keep on top of your finances along with these steps and you’ll have a fantastic score in no time.
If you are struggling with any kind of problem debts, speak with a Carrington Dean adviser on 0808 2085 195.
You could write off up to 75% of unsecured debt with our debt assistant.Check if you Qualify
Living standards questioned as over 270k Scots turn to their local Citizens Advice
More than 270,000 Scots have turned to their local Citizens Advice this past year, with 44% cases relating to benefits, new figures have revealed. Citizens Advice Scotland (CAS) has revealed in its latest annual report, ...
COVID-19: How do you cover your debt payments?
Millions UK residents are now struggling with the economic fallout of COVID-19 and are beginning to ask themselves the same question: how will they make the payments to their credit cards, personal loans, car finance ...
COVID-19: How to protect yourself from Sheriff Officers
The Scottish Government has introduced emergency provisions to protect people from Sheriff Officers during the COVID-19 outbreak. In its latest measure to protect Scots from the financial fallout of the pandemic, the government unveiled new ...
Coronavirus and pensions: regulators urge savers to remain calm
Scottish savers are being urged to remain calm as the coronavirus crisis continues to unfold across the country. Leading bodies The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) have joined forces with The ...