The start of a new year brings self-reflection and resolutions, and with Christmas spending at the forefront of everyone’s minds in January, experts at Zuto, have pulled together 10 tips to help improve your credit score in the new year.
Having a good credit score can help improve your chances of being accepted for credit and getting the best rates.
Whether it be registering on the electoral roll or cancelling unused credit cards, there’s both short and long-term things you can do to help boost your credit score.
1. Register on the electoral roll
Starting with the easiest step of all, the electoral roll is a list of names and addresses of people who are registered to vote in the UK. Your electoral details are recorded on your credit report when you register to vote, this allows lenders to confirm your name and address.
2. Make current payments on time
Paying your current credit card, loan and utility bills on time will show lenders that you’re reliable and capable of handling credit responsibility. Having accounts for a long period is also likely to improve your score.
3. Avoid the top end of your credit card limit
Try to keep your credit utilisation rate to around 30%. Credit utilisation rate is the percentage of credit you use out of your credit allowance.
For example, if your credit limit is £1,000 and you use £500 of it, your credit utilisation is 50%. Having a lower percentage is seen as a positive to lenders.
4. Keep credit applications to a minimum
Try to avoid applying for credit multiple times in a short space of time, as it makes lenders think that you rely too much on credit.
Most full applications, regardless of amount, will show up as a hard credit check which means lenders will be able to see this on your report.
5. Ideally favour soft searches
When applying for credit, favour getting a soft credit search first. Hard searches are visible on credit ratings whereas soft searches are not. This will mean that any enquiries you make won’t be seen by potential lenders.
Quotation searches, otherwise known as soft searches, do not impact your credit score.
6. Use your overdraft sparingly
An overdraft appears on a credit report as debt. However, if lenders are able to see that you can stay within your agreed limit then you will be seen as a reliable borrower.
7. Cancel unused credit and store cards
Although lenders like to see older accounts which are well managed, having an account which is no longer in use can have an impact on your credit score. Having access to too much available credit and not using it can actually hinder some applications. So, maybe think about cancelling those accounts which you haven’t used for a long time.
8. Avoid payday loans
Although short term loans can be tempting, try to avoid them where possible as the interest can be high, and they can become very expensive.
9. Financially delink
If you end a relationship with someone who you were financially linked to and they had poor credit, you don’t want their poor score to affect yours. You can contact credit agencies and ask for a notice of disassociation. This would mean that you would close joint accounts and pay off joint loans.
10. Check your credit report annually
Try to check your credit report either annually or before a new application. They contain masses of data, and you want to make sure that there are no errors which need to be corrected as that could affect a future application.
Jo Robinson, Director of Lenders commented: “The decision from the Chancellor to investigate credit card and loan APRs comes at a welcome time during the current difficult financial times everyone is experiencing. People may have been wary of applying for credit out of fear of damaging their credit score should they be declined, thus forcing them to accept the higher rate and having to pay more.
The introduction of soft searches into the car finance industry, along with increased transparency through real rates & guaranteed pre-approvals will surely have a positive effect on consumers who will be able to check their eligibility before committing and avoid possibly damaging their credit scores.”
