Having a good credit score is important if you are planning on getting a mortgage or obtaining any form of finance. Even people who want to buy a used car need good credit scores if they want to get decent rates. Good credit scores are important for other reasons as well. Landlords routinely check out potential renters’ credit scores to decide whether to rent to them or not. Employers also make it a habit to check the credit rating of job applicants.
Tips to raise credit scores
1. If you don’t have a credit card, it is a good idea to get one. If you already have a credit card, you should consider getting another one. The point is not to use these cards to rack up big balances and that should be avoided. Simply having a card issued to you by a credit card company can raise your credit score levels.
2. Take out a small personal loan and make regular payments on it until it is paid off. The loan should not be used for anything and it is best to put the loan money into a savings account. The loaned money is only to be used to pay off the loan.
3. Pay off existing credit balances so that the balance is around 10 percent of its total limit. Lenders are more likely to provide you with a loan if there is a large gap between what you owe and the credit available to you.
4. Use your credit cards lightly. Making large purchases on your credit card may lower your score even if you pay the balance each month. This is because the amount reported to credit bureaus is usually the balance on the last statement.
5. Check your credit card limits. Your limit may be lower than what you should have and can affect a lender’s view of your finances.
6. Regularly pay your utility and rent bills. Never miss a payment on any loan owing. All missed payments are reported to the three major credit bureaus and can affect your score by several points for each missed payment.
7. Make sure to get a free copy of your credit report and check that all information is correct. The three major credit bureaus are required by law to provide a free credit report once a year if you request it. Report all mistakes to the credit bureaus so they can fix them.
8. If you are a good customer a utility company or lender may be willing to erase one or two late payments from your records. You usually have to request this in writing and your chances are better if you have a long history with the company or lender.
9. Use your oldest credit card even if you haven’t used it in a long time. The longer your credit history the better and if you do not use an old card the account might get closed and won’t get reported to credit bureaus.
10. Consolidating loans may be a good option for you if you are having trouble making payments. When you consolidate all your loans into one low interest loan, you can pay them off quicker.
This article has been kindly written and contributed by Louis Rix, financial expert at Car Finance 247, the UK’s leading car loans provider.