You are probably aware of the importance of having a good credit score when it comes to applying for any kind of financial help.
Many people actually do not know what their own credit score is but, it is actually very valuable to know what your credit score is to see if you need to make any improvements. This is especially the case if you want to apply for credit in the near future, including a mortgage, a payday loan or a credit card and so on.
Once you have found out your credit score, it may have not been what you had hoped for or anticipated. So, what can you do improve it? After all, a bad credit rating means that you could easily be rejected by any kind of money lender.
There are plenty of ways which can help you to boost your credit score so that you can improve your chances of being accepted for a loan. In this guide, we provide insight into how you go about improving your credit score.
What is a credit score?
Before we get into it, it is important to understand what a credit score is. The credit score is essentially, all the information held on your credit report and the score which will ultimately dictates whether or not lenders will lend to you.
It is also a guide for lenders to establish how much interest they are going to charge and how much they will actually let you borrow from them in the first place.
It is important to note that a credit score is not the same across all companies as the different lenders will have different methods to calculate credit scores using differing criteria to make these assessments.
So the criteria which they go by will be what they base whether they approve or reject your application on.
What is a good credit score?
As discussed, different lenders will use particular metrics to assess your application, and therefore there are different credit rating scores. Looking at the three main credit rating agencies to see what is considered a good credit score is detailed here:
- Experian: A rating of 880 out of a possible 999
- Call Credit: A rating of 4 out of 5 on their rating scale
- Equifax: A rating of at least 420 out of a possible 700 on their scale.
Now that you are aware of best constitutes has a good credit score across the main three, let’s talk about improving your credit score.
Do not make too many applications
Making too many applications for credit can result in you damaging your credit score, explains Payday Bad Credit. To avoid this, you should take time to do research into your eligibility for a particular type of credit before you apply.
It will be a waste of time and damaging to your credit score if you make applications to lenders which you are not eligible for.
Making one or two applications will not affect your credit score, so do not let this put you off seeking out credit if you need it.
Pay off any existing debts
If you have pre-existing debt, you should really make it priority to tackle this before you start thinking about taking out more credit. Obviously, clearing debt will drastically help to improve your credit score as debt is often one of the things that holds peoples scores down.
When paying off debts such as a credit card, you should aim to pay your bill off each month in full rather than settling for the minimum payment.
This goes for loans too; you should always payback the full amount, plus the agreed interest rate on time. This is very important as you could also receive a fine for not doing so.
Does your partner have a bad credit score?
If you are legally married, you may be surprised to know that being financially associated with them can affect your credit score.
Known as shared finances, if you have a good credit score and your spouse has a bad credit score, they can bring your rating down since you are considered to be associated with them.
If you have any joint accounts or mortgages together, consider going solo or helping your spouse improve their current score.
Close any unused direct debits, store cards, credit cards or mobile phone contracts
A very simple step which can be taken is contacting companies which deal with your unused accounts. You may think these do not have any affect as they are just simply unused.
However, having too many accounts open can seriously damage your credit rating as it makes you look like you are irresponsible with money and/or you already have access to enough money as it is.
Potential lenders will look at how many accounts you have open and the amount of credit you have available to you at the point of application.