Are you finding it difficult to improve your credit score? Let us find out five ways to improve it.
Credit ratings can falter at times for different reasons. Normally a credit score suffers if you do not pay bills or loans on time. There may other reasons too like prior loan refusals, missed payments etc.
Why do you need to improve your credit score?
With a low credit rating you might find it difficult to get quick approval for another loan, or a credit card. A higher credit rating provides you with the facility to choose a suitable loan package with much lower interest rate. The credit score ranges between 300 to 850 and generally the top tier credit score is something between 760 to 850. Borrowers falling within this range are categorized to have the lowest risk. 620 is the average credit score and if your score is anything less than that, put more efforts.
A good credit score not only means that you are in a good position to get a new loan (stay away as long as possible). It also shows that you are in a better financial position and close to living a debt free life.
Note: You may ask for your credit report from any credit reference agency for £2 under the Data Protection Act 1998. Example: Experian
There is nothing to panic if your credit score is not perfect. You may use the following tips to improve it.
5 tips to improve your credit score:
Pay your bills on time
Late payments and penalties may damage your credit ratings. It is important that you pay your credit card bills or loan installments on time. Repayments done on time for one year can raise the credit ratings significantly. This will also help you to avoid CCJ (Country Court Judgment).
Consolidate – if you have any debts
Unpaid debts bring down the credit ratings considerably. With an escalating interest on the unpaid debt the borrower will find it extremely difficult to keep his credit score in shape. Debts can be consolidated to lower the repayment amount. This in turn will help improve the credit score.
Proper Budgeting
A proper budget can keep your credit scores go up. Managing funds while paying off your dues on time is very important to avoid late or missed payments.
Lenders approve your loan on the basis of your past credit scores. The above three factors solves almost 35% of the borrowers problem. The remaining 65% of the borrower’s problem can be solved by these two factors:
Payment history
The lenders always goes through your past credit history while approving your loan or credit card. Late payments play a big role in your credit ratings. Even if you are paying the minimum amount on time it would keep your credit score up. Other payments like utility bills should be paid in due time to avoid low credit rating.
The total amount of outstanding debt
The outstanding debt on your credit card or loan affects your credit rating greatly. Paying even the minimum dues for your card or loan helps to keep the rating high (however , paying ‘minimum amount due’ does not solve debt problem). Try to maintain a minimum number of credit cards to avoid over expenditure that often ends in outstanding or missed payments.
Major credit reference agencies in UK:
- Experian Ltd: www.experian.co.uk
- Equifax PLC: www.equifax.co.uk
- Callcredit Ltd: www.callcredit.co.uk
