How to build your credit score
Why is your credit score important?
It is important for a number of reasons, but overall lenders combine your credit score with the information in your credit report to assess your risk as a borrower. Having a high score will boost your chances of receiving credit, but having a less than perfect score means lenders may question your ability to repay, or you could be denied credit altogether.
How can I improve my credit score?
Use a credit card little and often.
Using a credit card responsibly and keeping it active will help build your score. Spending small amounts and paying your bills on time each month, instantly makes you look more trustworthy to lenders.
Check for mistakes on your report and fix them.
Your score is tied to the information on your report. You may find that sometimes the information on your report might not be accurate. For example an account may appear as ‘open’ when it is ‘closed’, this will make your credit score lower. Please be advised to check your report regularly, to spot and fix any mistakes as they contribute to your score.
Pay your bills on time.
Struggling to pay your bills on time suggests to lenders that you have trouble managing your finances. To avoid this, set up direct debits so that the money exits your account on time.
Make sure you are not linked to another person on your report.
You may have a spouse, friend, family member who is linked to your credit report that could affect your own personal score.
Eliminate any outstanding debt you may have.
Before applying for credit, ideally you should try and pay off any high level existing debt. Lenders may be hesitant when borrowing you money if you are already in a lot of debt.
Check for any fraudulent activity on your report.
Although rare, it is important to always be aware if something is incorrect on your report; someone may have taken out credit in your name without your knowledge. In the unfortunate case that this happens, be sure to contact the credit reference agency immediately so they can update your file.
If you want to see your own detailed report, or would like to receive further information on how to improve it visit https://www.creditknowledge.co.uk.