by Ben Sweiry ·
Modified on 14 September, 2022
You can improve your credit score by doing such things as paying off debts and credit card debts on-time. This will help you build-up your credit score, meaning it will go up. In 2020, the national average score reached 711.
Improving your credit score will not happen overnight, but making some small important changes can really help your chances of being approved for financial products including loans, credit cards, mortgages and even a cell phone contract.
In order to improve your credit score, you should consider paying off debts and credit card bills on time, but as well as this, you can improve your credit score by registering to vote, closing down unused credit cards and making sure to avoid applying to too many loans at once.
Key Points
- There are some really easy ways to improve your credit score without doing too much.
- A credit score is a value given to you based on your financial history.
- Lenders will use your credit score to determine your loan and mortgage eligibility.
- Closing down unused credit card accounts and joining the electoral register are just 2 ways to really help your credit score.
- Make sure you don’t have too many outstanding loans as this can harm your credit score.
What is a Credit Score?
Before we get into how to improve your credit score, it’s important to understand what your credit score actually is.
Your credit score is a numerical value that indicates your suitability to receive financial credit. Banks, credit card companies, and lenders use a person’s credit rating to decide if they are at risk of defaulting on a payment, and if they will be able to afford the repayments.
Your credit score is based on multiple factors, including: your historical payment history, the number of cards or loans open, your residence, and even whether or not you vote. One report revealed that only 22 percent of Americans have a credit score of 800 or greater
Although if you apply for a payday loan won’t affect your credit score, if you do apply for a loan then lenders will do a credit check to find out this information, and assess your suitability to receive financial credit.
Why Does My Credit Score Matter?
When you’re applying for a loan, mortgage, credit card or even a mobile phone contract, your credit rating is one of the most important things providers will take into account.
Of course, providers will look at other things too, such as the amount you want to borrow, your name, age and where you live, but a credit score gives an indication of how well you have paid other types of credit and financial obligations in the past.
If you have a good or fair credit score, this will open you up to several financial products and essentially give you more financial freedom. Generation Z has the lowest score — 674 on average.
Therefore, if you want to buy a car, a house or even rent an apartment, your credit score is important to help you get approved and get on with the important things in life.
How Can I Improve My Credit Score?
There are several easy things you can do to improve your credit score and therefore become a more eligible candidate for a loan, mortgage, credit card or even a mobile phone contract. Read below for some tips to improve your credit score;
Join The Electoral Register
Although it may seem silly and unrelated, joining the electoral register can really help to improve your credit score!
The electoral register provides a record of your name and personal information. Registering to vote through the electoral register creates an account of your name, address and date of birth which lenders can then use to confirm your identity.
This will help your chances of being approved by a lenders and it will instantly improve your credit score because it confirms your name, date of birth and address. Not to mention, it is free to do!
For lenders, it adds a lot of peace of mind knowing that you are who you say you – and you can confirm your location too.
Don’t Apply For Too Many Credit Loans At Once
If you apply for lots of credit cards or loans in a short space of time, this could negatively impact your credit score.
This is because, to a lender, it makes you look desperate if you are making lots of applications every day.
Your applications will be recorded by a credit reference bureau and your credit score will be adjusted to reflect this risk to other lenders too.
Dime Alley can help with this!
As we are a loans connection service, we will match your loan enquiry with the lender most likely to approve your application and offer you the best terms. More importantly, our checks do not affect your credit score, so you can apply as many times as you would like!
Control Your Utilisation Rate
Your utilisation rate, or debt-to-loan ratio, is something that lenders take into serious consideration before offering any credit products.
Your utilisation rate is a percentage which shows a lender how much credit you use compared to how much you are able to. This shows a lender that your not using credit irresponsibly.
For example, if you have a credit card that allows you to borrow $1000 per month and you use it for $100, your utilisation rate would be 10%. Some credit rating agencies suggest that you keep your utilisation rate at around 30%.
This shows that you’re a responsible borrower who keeps up with repayments and can improve your credit score dramatically.
Close Down Any Unused Credit Cards
Having too many credit cards does not look good on your credit score – since lenders think that you have access to a lot of cash and could use it at any point.
If you have access to a lot of credit but have a small salary it means that lenders will likely stay clear of you and your credit score could be negatively impacted. So if there are cards that you don’t need, just pay them off or close them altogether.
If you’re looking to make immediate changes to improve your credit score, implementing these methods is a great place to start. Taking these measures to improve your credit score will undoubtedly increase your financial credibility and make you more likely to be accepted for financial products in the future.