Photo from Unsplash

Originally Posted On: https://ladyjaney.co.uk/6-simple-ways-to-build-your-credit-score/

A recent study revealed that building your credit score is among your smartest financial decisions. Indeed, the stronger your credit score, the more likely you will get approved for financing at the most favourable rates. Moreover, it can affect your ability to obtain loans, mortgages, mobile contracts, and other services. Building your credit score may take a while, but starting now can save time and financial headaches further down the line. Below are seven simple things you can do to succeed.

Make your payments on time

Payment history plays a significant role in determining your creditworthiness and accounts for a significant portion of your credit score. Consistently making payments by their due dates demonstrates your reliability and financial responsibility to lenders. Late or missed payments can severely impact your credit score and stay on your credit report for years. On the other hand, consistently paying your bills on time shows lenders that you are a trustworthy borrower who can be relied upon to meet financial obligations. By establishing a track record of timely payments, you build a positive credit history, which can open doors to better interest rates, higher credit limits, and improved financial opportunities in the future. Maintaining a diligent payment schedule is key to building and maintaining a strong credit score.

Keep credit utilisation as low as possible 

Your credit usage is the proportion of the credit limit that you use. For instance, if you hold a £2,000 credit limit and have spent £1,000 of it, your credit usage is 50%. A smaller proportion is usually seen favourably by lenders and will raise your credit rating. By keeping your credit utilisation low, you show that you can effectively manage your available credit and are not overly reliant on borrowing. This responsible habit can help improve your credit score over time and increase your chances of being approved for future credit applications with favourable terms and conditions. Experts suggest maintaining your credit use below 30% if at all feasible.

Use your credit card

If you do not have credit or are seeking to repair it, correctly using your credit card will assist since issuers record your payment history to credit agencies. However, because debit card usage does not appear on the credit report, it cannot assist you in building or improving your score. Even if you must deposit to obtain a credit card with a guarantee, doing so can help you establish your credit standing and ultimately be approved for unsecured cards or bigger loans. But what if you’re unemployed? When you are out of work, it is possible to obtain a credit card. You can read helpful articles like the one on this link moneytrumpet.co.uk/can-unemployed-people-in-the-uk-get-a-credit-card to learn what to do if you are unemployed but require a credit card.

Avoid moving too frequently 

Avoiding frequent moves can positively impact your credit score in several ways. Moving often can disrupt your credit history, as lenders prefer stability and consistency in an individual’s residence. Each time you move, you may have to update your address with creditors, which can increase the risk of missing important bills or payments, negatively affecting your credit score. Additionally, frequent moves can make it challenging for lenders to verify your personal information and employment history, potentially raising concerns about your stability and creditworthiness. Establishing a stable residence and maintaining a consistent address can demonstrate reliability to lenders, contributing to a stronger credit profile.

Regularly check and report errors

Even little errors, such as a misspelt address, can harm your credit score and cause a lender to reject your credit. Check your credit history to ensure all the data is correct and updated. If you see an error, contact the vendor immediately and request that it be rectified. If negative information on your credit report is true but occurred under unusual circumstances, let’s say a job loss or medical stay, you can add a Notice of Correction to clarify this.

Avoid applying for too many credit cards

While it may seem tempting to have multiple lines of credit, excessively applying for credit cards can negatively impact your creditworthiness. Each time you apply for a new credit card, it triggers a hard inquiry on your credit report, temporarily lowering your credit score. Similarly, having too many cards can increase the risk of overspending and accumulating excessive debt, making it challenging to manage your finances effectively. Lenders may also view many credit card applications as a sign of financial instability or desperation for credit, which can raise concerns about your ability to repay future debts. Instead, focus on maintaining a manageable number of credit cards and using them responsibly, making timely payments, and keeping balances low to establish a positive credit history. 

Building your credit score is crucial for your financial well-being and future opportunities. By implementing these strategies consistently and responsibly, you can gradually improve your credit score, opening doors to better interest rates, loan approvals, and overall financial stability.