AVOID THESE FIVE MISTAKES IF YOU WANT A HIGH CREDIT SCORE

‘Credit scores don’t matter… until they matter.’ I was talking with one of our users and she said this. I love this quote because it perfectly sums up when and why people think about their credit score.

As the boss of one of the UK’s largest credit-checking companies, ClearScore, I think about credit scores a LOT.

If you aren’t currently looking to borrow any money, then the chances are that your credit score is not on your priority list. But anytime you want to get a credit card, mobile phone contract, rent a flat or get a mortgage, it becomes one of the most important things in the world.

Your credit report is a bit like your financial CV – it gives lenders a view of your past relationship with credit. The higher your score, the more confident lenders feel that you’ll repay what they lend to you.

Here then, are the most common credit mistakes that I see people make:

1. Using too much of your available credit

A classic rookie mistake is to misinterpret a credit limit as ‘free money’ and end up spending the lot.

For a better credit score, try not to use too much of your available credit.

Only using a percentage of your credit limit – preferably 30 per cent – shows lenders you can manage your credit sensibly.

2. Not fixing mistakes on your credit report

Your credit score is based on the information in your credit report. If this information isn’t accurate (e.g. an account appears as ‘open’ when it is ‘closed’), then your credit score won’t be either. This could mean your score is lower than it should be.

By checking your credit report regularly, you can spot and fix any mistakes, which can help improve your credit score.

Don’t worry about differences on your individual balances, focus instead on your repayment history and which accounts are open or closed.

3. Not being on the electoral roll

Getting on the electoral roll or electoral register lets credit reference agencies check your identity, which can make you look more reliable to lenders.

If you aren’t already on the electoral register, or you aren’t sure, then check and do it now. You can sign up via your local council.

4. Making multiple credit applications

Every time you make an application for credit, a ‘hard search’ is recorded on your credit report, this can affect your credit score.

If you make too many credit applications in a short space of time, this makes lenders think you’re desperate for credit.

So, if you’re rejected for credit, try to resist the temptation to keep applying. Instead, wait a while before you apply again.

5. Not paying your bills on time

Finally, if you miss a bill payment then this will go down as a bad mark on your credit report. Try to stay on top of your bills by setting up direct debits.

This shows lenders that you can stay on top of your credit, and your credit score will be all the better for it. The more bills you regularly pay in full in your name, the better.

If you are struggling with your finances, then reach out to your lenders or service providers and explain the situation – they have a duty of care to help you.

If you avoid these five classic mistakes, you are more likely to maintain a clean financial bill of health and be in a strong position next time you need to borrow money.

Follow Justin Basini the CEO and Co-founder of The ClearScore Group on Twitter.

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2023-12-04T14:44:00Z dg43tfdfdgfd