For better or worse, credit scores have become a big part of modern life. They affect your interest rate, your credit card limits, and even whether or not you can sign up for certain types of insurance policies. And while having a bad credit score isn’t the end of the world — companies like 1st UK mortgages can help you if that’s your case — it is generally better to have a good credit score.
The good news is that improving your credit score isn’t too complicated. It can be hard depending on your financial situation and past history, but the actual mechanics of the process aren’t hard to wrap your head around. Here’s how you can do it.
Step #1 – Read your credit report
Your credit report contains all the information that credit agencies use to determine your credit score. Here in the UK, that information is available to you for free whenever you want to see it. You can look up your credit online, or contact the credit agencies directly to request a physical copy of your report.
You’re looking for three things on your credit report. First, you want to know what your credit score is, and whether or not that’s a low score for that agency — they use different scoring systems. The second thing you’re looking for is the causes of your low score, which usually come down to bills paid late or left unpaid. And finally, you want to keep an eye out for any information that might be missing or incorrect.
Step #2 – Fix any mistakes that exist
Clerical errors or automation mistakes can lead to mistakes appearing in credit reports. Maybe a bill that you paid months ago is still listed as unpaid, or maybe a bill that you have been paying on time for years is completely missing from your report. Wrong information can tank your credit score and fixing it is often as easy as making a phone call, so keep an eye out for opportunities to do so.
Step #3 – Optimize what you can
There are a variety of ways in which you can boost your credit score in the future. Pay your bills on time, register as a voter, avoid moving homes a lot, and lower your credit utilization — in other words, try to only use 30% of the credit you have available or less. These are the main ways in which you can boost your credit score through your own actions.
These actions will all help lenders feel more confident lending money to you, which will boost your credit score. On top of the steps listed above, you should also be wary of joint accounts. Having a joint account shared with someone with a low credit score can have a negative impact on yours.
Boosting your credit score can be a slow process. But the good news is that here in the UK, credit agencies only keep your records for upwards of six years. This means that if the mistakes on your credit report are all several years old, they may already be close to becoming irrelevant to your overall score.