There comes a time in most people’s lives when it is time to apply for a mortgage – and by that point, its too late to do much to quickly remedy your credit score if it’s too low to secure a loan. That’s why it’s important to practice good financial habits throughout your adult life so that when it’s time to buy a house, your credit score doesn’t let you down.
Use a credit card little and often
Using credit regularly and responsibly is the key to building your credit score. It goes without saying, but set up a direct debit each month to pay off the balance in full, or take advantage of 0% interest deals – just make sure there is a plan in place to pay off the debt before the high interest charges apply.
Use less than 50% of your available credit
You will be able to see how much you are using in your credit report – aim for between 20-50%. Using too little will make the lender wonder why you are applying for more credit when you have lots available already, using too much will make them think you are overstretching yourself.
NEVER withdraw cash on a credit card
Not only is this incredibly expensive in terms of fees, it shows poor money management skills which lenders will obviously frown upon.
Cancel any unused credit cards
…but keep any longstanding accounts with good credit histories open. An example would be if you were switching credit card provider – if you had paid the old card off on time for years you would want to keep the old credit card open. But if you had a credit card that you had never used or had been dormant for a while, you should close that account.
Spread out your credit applications
Applying for too many things in a short space of time lowers your score – use an eligibility checker to see your chances of being accepted before applying and only apply when there is a high chance of being accepted.
Lenders like consistency – check your credit report and ensure all your active accounts addresses are the same.
Correct mistakes on your credit report
Immediately raise a dispute with the credit report provider if for example it is still showing active debt that you have already paid back.
Get on the electoral roll
If you haven’t done so already, contact your local electoral register and make sure you are listed on the electoral roll at your current address.
Pay off debts with any savings you have
If you have built up a savings fund, that’s great, but when it comes to wanting to borrow more money, lenders won’t consider your assets, they will just look at your liabilities. To boost your credit score, use some of your savings to pay down your debts.
Always pay your bills on time
Missing a payment can hugely affect your credit score negatively for years. It’s so important to get in the habit of making sure every bill is paid on time. Set up direct debits for everything.
I’ve found another post here with a few more tips on helping your credit rating.