Improving your credit score needn’t be daunting, and with these five easy-to-stick-to resolutions, it couldn’t be simpler.
Whether it’s vowing to cut out chocolate from your diet, hit the gym every single day or cut out the alcohol, we’re all guilty of setting New Year’s resolutions that, well, rarely last all that long.
What’s your credit score?
In layman’s terms, your credit score is a number that represents how well you’ve managed credit in the past. When we say credit, we mean anything from credit cards and loans to mobile phone contracts and utility bills.
Quite simply, the higher your credit score, the more likely lenders are to accept your application for credit. Low credit scores not only make being accepted more difficult, but they can make your terms (i.e. the interest rate you’re offered) less competitive too.
How to improve your credit score
If we’ve sold you on the importance of improving your credit score but you’re just not sure how to do it, then stick right here, because we’ve got five resolutions that could help your score soar.
1. Vow to be punctual
Late or completely missed payments show up on your credit history and can negatively impact your credit score, because they make you look like an unreliable borrower. So, if you don’t already, make sure one of your resolutions is to pay each and every form of credit you have on time and in full.
This’ll not only help you steer clear of unfriendly charges, but it’ll make you look more reliable to prospective lenders - should you find yourself applying for further lines of credit in the future.
If you’re guilty of missing payments because you’re having trouble remembering when bills are due, consider setting up a direct debit to take away the hassle of remembering - but remember to make sure you have enough in your account to cover the payment.
If you’ve got lines of credit you simply can’t afford to repay in full each month, although not ideal, you can get away with making less than the full payment. However, bear in mind you’ll likely have to pay interest on what you owe, making it more expensive.
2. Check your credit report
Commit to checking your credit report once a month. It needn’t take long or be a difficult task, but it’s important to keep an eye on your activity to make sure nothing suspect’s going on.
If you spot a mistake (like being wrongly accused of missing a payment) or, even worse, you see there’s been fraudulent activity on one of your cards, being hot on the pulse of what’s going on will help you fix the issue and get your credit score back on track as quickly as possible.
You can check your credit report for free using sites like ClearScore, Noddle and Equifax.
3. Keep your credit utilisation ratio low
Your credit utilisation ratio is the difference between how much credit you have available to you versus how much you’ve used. For example, if you have a credit card with a £1,500 limit and you’ve spent £750 on it, your credit utilisation ratio would be 50%.
The ideal credit utilisation ratio is around 30%, so if yours is way above this, resolve to a) reduce it, and b) keep it at that way.
4. Think before you apply
If you’re guilty of repeatedly applying for credit (credit cards, store cards, loans or otherwise), stop. It might seem like the natural thing to do if you’re being rejected by the lenders you’re applying for, but multiple applications can make you look desperate to access cash, which can be an instant turn off for some lenders.
Instead of endlessly applying to lots of different creditors, take the time to thoroughly research your options before you apply and see which lenders are most suited to your circumstances. This’ll increase your odds of being accepted in the first place and eliminate the need for multiple applications.
5. Plan some purchases
It might seem unfair, but a non-existent credit history can be just as damaging as a bad credit history. This is because although there’s no evidence to suggest you can’t manage money well, there’s also no proof to show you can.
To start putting your money management habits on the map, pledge to start spending manageable amounts on your credit card on a regular basis. The purchases don’t have to be extravagant, something like your weekly petrol bill would do, but they’ll make in-roads in showing you’re a responsible and reliable borrower.
If you’re new to the world of credit card spending, just make sure you remember some of their golden rules:
1) Only spend what you can comfortably afford to repay
2) Always make your payments on time
3) Make sure you make at least the minimum payment.
So, there are our five credit-improving resolutions. For more tips on how to improve your credit score, check out our guide on it here.
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