June 10, 2022
Russell Braiden

How to Improve Your Credit Score

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How to Improve Your Credit Score

Discover ways of improving your credit score and getting a mortgage.

When you are buying your first home, you are probably also simultaneously thinking about getting your first mortgage and what’s necessary to do to get it. To approve you for a mortgage, the mortgage lenders will need to look at how valid you are as a borrower by examining your credit score.

When the lender assesses your credit score, they will look at  your credit report and credit history, and this will include data on your previous credit and whether there have been skipped or delayed payments.

Learning to look after your financial situation is the best possible start you can give yourself for creating a good credit score. The sooner you start, the better. In the first instance, it’s a good idea to look at whether there are any undesirable issues on your credit report, that could be removed from it. The more positive items on the report, the better you will look to lenders. If your credit report is good, lenders are more likely to give you better deals on your mortgage.

Tips to Improve Your Credit Score:

Ensure that You Have Bills Under Your Name

Any utility bill, like a mobile phone bill or electricity or gas bills are considered to be a type of credit. Ensuring that you pay your bills on time is a great first step as it shows the mortgage providers that you can pay them dependably. It is worth moving some utility bills into your name if you don’t currently have them as this will help improve your score if the bills are paid on time.

Bill and Card Payments

Many lenders will see a large amount of credit card debt, a large overdraft or generally having a large amount of credit available as a negative thing. If what you owe is also a large percentage of your total limit, it can also be considered negatively, so we would advise that you pay off debts but balance that with closing old accounts. That way the percentage of what you owe doesn't grow proportionally in relation to the accounts you are closing down (though if you pay off the debts first, it won't be an issue).

Credit Cards

Many people think that credit cards are a bad thing but actually it can be hard for lenders to judge whether you are going to be able to make repayments if you haven’t borrowed money before. An easy way of rectifying this is by using a credit card to spend small amounts and then paying it off monthly. The lenders can then see that you’re a responsible borrower. If you’re struggling to get a credit card, you may find it easier to get an arranged overdraft or a credit building credit card.

A Credit Check Can Remove Points from Your Credit Score

Whenever you apply for new credit, whether it’s a loan, a credit card, or a utility bill, it will marginally reduce your credit rating. It’s worth being aware of this so you can be conscious of how many potential credit checks and credit applications you put your finances through and therefore your credit score is reduced by. Regularly applying for credit in different ways can also make lenders think that you rely on credit too much and that you may be too risky for them.

Saving Money for Large Purchases

Large, random spends on your credit card or missing credit card payments can look very bad to prospective lenders, so if you know that you have a sizeable purchase coming up or as general good practice, save money each month to prepare for it. Saving for known or unknown big spends is a valuable way to manage your finances.

Register on the Electoral Roll

Making sure that you’re on the electoral roll is very important because it’s what mortgage lenders will use to verify your name, address, and the history of where you have lived. The lenders will need to check those details to make sure you are you who you say you are before they can give you a mortgage. If you aren’t currently registered on the electoral roll, it can potentially cause problems with your mortgage or stop it being approved.

Make Sure that Your Address is Current & Try Not to Move too Often

It’s more difficult for credit checks to be done if you have moved recently and that can cause your score to drop. If you register to vote, that is a good way for a credit check to be able to confirm your most up to date address and the longer you stay at an address the more your credit score can grow too.

Keep Your Joint Accounts in Check

If you share a bank account with another person, anything they do within the joint account can affect your credit score. It is essential that you monitor their activity and prevent them from doing anything that could affect you. If they do something negative in the joint account, it can then negatively affect your credit score.

Look for Fraud

If you look at your credit score and spot any random credit checks or activity that you haven’t caused, then you need to report it so it can be investigated as to whether someone has fraudulently used your information. If they have, their actions could impact your credit rating, so make sure to take steps as soon as you notice the issue.

Rectify Outstanding Debt Issues

Dealing with outstanding debts and getting rid of payments is one very important way of helping your credit score to improve. Applying for more credit to get rid of the debt would again reduce your credit rating, so repayments are really the best solution.

If you’re looking to get a mortgage, a good credit score will help you to secure a good mortgage deal and find the best interest rates. In the meantime, if you have bad credit, you can take some of these steps to help it move in the right direction towards a much better credit score.

If you are looking to buy a home, contact Transparent Mortgage Services on 01424 444597 or info@tms-fs.co.uk and we can still look for the best mortgage deal for you.

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