A credit score is a three-digit number that symbolizes the ability to repay the loans or borrowings. Therefore a good credit score is essential for the approval of any new credit cards and for loans. It is a looming question for many that arise at the time of need. How can I improve my credit score?
Lenders use credit scores and credit ratings to decide. Scores are numerical whereas, the rating shows you on a scale.
The data held in your credit files are the source of credit scores.
It is usually the lender who decides the credit score required for a potential customer. However, it can vary from lender to lender or from 2 different products from the same lender.
The data on your Credit File/Credit Report usually plays a part in deciding:
- whether to lend to you
- The amount to be borrowed
- The Interest to be charged.
Lenders are most interested in your current financial situation as compared to your past. Your financial decisions from the last six years will be on the record.
Why is it important to have a good score?
Having a good credit score provides you a bit more security. There is always a possibility for an emergency and immediate requirement of funds. In that case, a low credit score will not help you and makes it almost impossible to get a loan. Whereas a higher score means that you are a lower risk for the companies. It also shows you have a history of managing your credit appropriately. You may also receive:
- Better Interest Rates. If you have a history of repaying your credits, you will be considered a safe investment. Hence, you will be offered better interest rates on loans and credit cards.
- Higher Credit Limit. A higher credit score increases your credibility. Eventually, this allows you to receive higher credit limits on your cards and for loans. Even you may receive more time from your suppliers if you have a good credit history.
- You will receive more offers. There might be various offers and having a good credit score increases your chances for approval. It also opens doors to new offers that are offered to limited individuals.
How can I improve my credit score?
- If you haven’t registered on the Electoral Roll, Register for it. It’s significantly harder to get credit if your name is not on the Electoral Roll. You can go to the government website and register online.
- Payment of bills helps. The best way to improve your credit score is by paying your bills on time. By paying your bills on time you will see your rating rise eventually. Ensure that you don’t miss any dates, then you will have to catch up again.
- Try to close off existing debt before applying for new credit. If you have an outstanding amount to be paid. It is ideal that you close off the current and apply for a new one. Request for new debt makes banks and credit card companies hesitant.
- Check for mistakes on your file. The slightest of incorrect information can affect your credit scorer. Do a proper check and ensure that all the information regarding you is accurate.
- Close accounts that unused and not needed. If you have enough access to credit, it becomes difficult to receive further debt from lenders.
- Build your credit history with a credit card. The best way to improve our credit score is to use a credit card. Make a few purchases and pay the bills accordingly and, this will increase your credit score.
- Take a prepaid card. You can take out a prepaid card to pay off your credits. This helps you improve your credit ratings. These cards charge a small monthly fee as a small loan. You will have to keep paying for it for 12 months. However, you don’t need a credit reference as you don’t need to borrow funds. After 12 months, they will add an entry to your record stating that you have successfully paid off the debt.