We've all heard how important it is to have a good credit score. Your score affects many aspects of your financial life - not least of which is that lenders use it as a basis to determine if you're able to use their loans or services.
It's easy to forget about your credit score day-to-day. However, when it comes to finding a new home, opening a new account or needing to borrow money, you'll find your credit score will suddenly be on your radar.
What is a credit score?
Your credit score is usually a number between 0-999 - the numbers depend on the credit reference agency you use. The higher the number, the less ‘risky' you are in the eyes of a lender.
A good credit score typically means lower interest rates and better deals on borrowing. So, ideally, you should aim to keep your score as high as possible.
With this in mind, here are six tips to help you keep your credit score healthy.
1. Ensure you're on the electoral register
If you aren't enrolled on the electoral register, this can have an impact on your credit score as the reference agencies won't be able to find a confirmed, permanent address for you on their records. Sign up to the register, and you'll see a quick improvement in your score.
2. Pay your bills on time
Paying bills on time is one of the biggest factors that determine your credit score - so staying on top of payments is essential.
If you default on a bill, and especially if the lender successfully takes you to court for non-payment (a CCJ or County Court Judgement), your credit score will take a hit and could be negatively affected for some time to come.
3. Don't make lots of credit applications at once
Be wary of opening several credit cards or applying for a number of loans in a short period of time. Every time you apply for credit, the lender will run a 'hard' search on your credit report, which will stay on there for up to two years, affecting your score.
Too many hard searches in a short period, even if you don't end up taking everything you apply for, gives the impression you are scrambling for money.
However, don't be afraid to apply for new credit if you really need it and can manage the repayments. As long as you can demonstrate that you're a responsible borrower who makes payments on time, your score should stay strong.
4. Clear your debts
Make sure you set aside enough money to pay off any existing debt before you take on any more. You should focus on your most expensive payments first, such as high credit card balances or personal loans, and then pay off each successive balance once you've freed up the money.
5. Check your accounts regularly
Consistently observing your accounts and checking credit card statements won't improve your credit score in itself - but it can help you spot fraudulent activity that could be damaging. If you notice anything that doesn't look right on your account, you should investigate it immediately.
It's also a good idea to check your credit score regularly; there are several services that will allow you to do this for free.
6. Close or reduce unused accounts
Finally, if you have a large amount of credit available to you on cards and accounts that you're not using, you could look to reduce the amount or close the account entirely.
Reducing the amount may be the better option, as this demonstrates that you're planning responsibly and can be trusted not to borrow more than you really need.
Building credit takes time. Stay patient and keep on top of all your payments, and before long you'll be in excellent shape.
Copyright © 2018 Article was made possible by site supporter Rachael Matthews.