Maintaining a healthy credit score is crucial for financial stability and accessing mortgage deals. Here are some actionable tips to help you improve your credit score and unlock a world of financial possibilities.
Obtain your credit reports
Start by obtaining your credit reports from the three major UK credit reference agencies: Experian, Equifax, and TransUnion. These reports provide detailed information about your credit history, including outstanding debts, payment history, and financial associations. Review the reports carefully for any errors or discrepancies that could be negatively impacting your credit score.
Register on the Electoral Roll
Being registered on the Electoral Roll at your current address can positively impact your credit score. Lenders often use this information to verify your identity and residential stability. Make sure you are registered to vote with your local council, as this simple step can significantly enhance your creditworthiness.
Pay bills on time
Consistently paying your bills on time is crucial for improving your credit score. Late payments or defaults can have a detrimental impact on your credit score. Set up direct debits or standing orders to ensure timely payments of your utility bills, credit card bills, and other financial obligations. Consider using budgeting apps or calendar reminders to stay organised and avoid missed payments.
Minimise credit utilisation
Your credit utilisation rate is calculated based on your ‘revolving credit’, this is a term used to describe credit lines with no set end date. For example, a credit card is an ongoing open line of credit, whereas a loan or a mortgage has a set term. Aim to keep your credit utilisation below 30% to demonstrate responsible credit management. If possible, pay off your credit card balances in full each month. If that's not feasible, make more than the minimum payment to reduce outstanding balances and lower your credit utilisation.
Manage existing credit
If you have credit cards, loans, or other credit accounts, ensure you manage them responsibly. Avoid maxing out credit cards or taking on excessive debt. Regularly review your statements, track your spending, and make timely payments to build a positive credit history.
Avoid applying for multiple credit products
Every time you apply for credit, it generates a hard inquiry on your credit report. Multiple hard inquiries within a short period can indicate financial instability and negatively impact your credit score. Instead, research and compare credit products before applying and focus on targeted applications for those that best suit your needs.
Maintain long-term credit accounts
Length of credit history is an essential factor considered by lenders. Keeping older credit accounts open and active, especially if they are in good standing, can positively influence your credit score. Even if you no longer use a particular credit card, consider keeping it open to maintain a longer average credit history.
Monitor your progress
Improving your credit score takes time and consistent effort. Regularly monitor your credit reports and track your progress. Use credit monitoring services or apps that provide updates on changes to your credit file. By staying vigilant and proactive, you can ensure the accuracy of your credit information and make adjustments to improve your creditworthiness.
Improving your credit score is a gradual process that requires responsible financial habits and consistent effort. By understanding the factors that influence your credit score and implementing the tips mentioned above, you can take control of your financial future, open doors to better mortgage lending opportunities, and achieve long-term financial stability.
If you’re looking to get a mortgage and want to understand what deals are available to you, get in touch with us for a free, no-obligation appointment.
