Four Tips to Improve Your Credit Score

One of the most essential – and most misunderstood – aspects of your financial presence is your credit score. Credit scores are used by banks and lending institutions to assess risk, and are essential to acceptance or rejection for everything from arranged overdrafts to car financing to your first home. A poor credit score – as adjudicated by one of three independent credit reference agencies – indicates high risk. But what can you do to improve your credit score, and reduce your perceived risk?

Register to Vote

If you haven’t already, you should make sure that you are registered to vote. This might seem an odd first move for someone addressing their credit score, but is in fact a crucial one with respect to credit reference agencies, who use the electoral register to verify your identity. If a reference agency is unable to properly verify your identity, you may not be accepted for many financial products at all, irrespective of your financial acuity elsewhere.

Consolidate Your Debts

Most credit scores are poor by virtue of a person’s relationship with debt. Utilising credit or debt can absolutely be a beneficial thing, and these products exist for good reason. The problems start if you find yourself with debt you can’t manage. Late or missed payments with respect to anything from a credit card to an unarranged overdraft can have disastrous consequences to your own financial wellbeing, and to your reputation with lenders.

If you are struggling with multiple sources of debt, getting this debt under control should be your first priority. Debt consolidation loans can be especially useful in these scenarios, allowing you to conclude business with prior lenders and simplify your payments going forward. With a shrewd approach to repayments, you can start to heal your credit report.

Pay On Time

Indeed, making payments on time in general is a positive move for your credit score. Late payments for anything, including utilities bills and your rent or mortgage, can be viewed dimly by credit reference agencies and by lending institutions; late payments indicate an uncontrolled approach to personal finances, and an increased level of risk as a result. Resolving to pay regularly, by contrast, paints you in a positive light to lenders.

Start Using Credit

Students and younger adults often have the opposite problem to others with a poor credit score, in that they do not have enough of a history to attain a high credit score. People who have never borrowed money before, or who have only a few years of paying their own bills behind them, are an unknown quantity to credit reference agencies and to banks – and as such, treated as high risk.

If you are in this position, the simplest solution is, somewhat counterintuitively, to use credit in some form. By getting some form of credit card, using it and paying the balance in time, you are creating a credit history that reference agencies can track; starting out with good habits ensures a high score, and a positive approach to future finance.