Why should I try to improve my credit score?
When you apply for a loan or any other kind of credit, the lender will take a look at your credit score to decide if they will lend to you, and what kind of interest rates you will get. This is based on several factors, such as your credit report information, the details of your application and any data they already hold on you, particularly if you are already a customer.
The higher your credit score is, the less risk you pose to a company that is lending you money. As a result, you are more likely to be approved for a loan as you have proved your ability to make payments on time and responsibly manage your credit. With a higher credit score, any loans you are approved for are also likely to come with lower interest rates, which makes borrowing money significantly cheaper. It also means that you have a better chance of being offered higher credit limits, and being able to borrow more money at once can help you to achieve life goals, such as buying a house or a car, faster.
Tips and Tricks to improve your credit score
Register your address on the electoral roll to keep a proof of address and if you are able, try to avoid moving home too often. Whether you live alone, with flatmates or with your parents, you can still register to vote and it is a great way to prove your address. Additionally, living at the same address long-term wherever you can reflect well on your [credit score]. Moving around too much may result in it looking like you are struggling to meet rent payments. Lenders love to see stability and consistency.
If you are young and just starting out, or have just moved to the country from abroad, you may have very little or no credit history. This can make it extremely difficult for companies to assess you, lowering your credit score. However, you can overcome this problem by taking steps to build a credit score for yourself. Consider signing up for a credit builder card, which tends to have lower spending limits as well as high-interest rates. This means that with careful and continued use your credit score will improve quickly.
Credit builder cards, much like regular credit cards, are most effective when used regularly for small purchases that you know you can afford, then repaid regularly before any interest kicks in. When it comes to regular credit cards, try to keep your credit utilisation as low as you can. Credit utilisation is the percentage of your credit limit you are using on a month by month basis. The lower percentage you use, the higher your credit score. Used like this, your credit score will improve much faster. Equally, other loans such as a car loan can improve your credit score.
How fast will a car loan raise my credit score?
This can depend on many things, but it isn’t an overnight process. Check Tally’s guide to see how long it will take for your car loan to begin improving your credit score.
There can often be several weeks between opening a new bank account or getting a new credit card and these appearing on your credit report, so your score will likely take this long to start to improve. Additionally, your score may not actually improve until your accounts mature some, so until then make sure to pay your outstanding fees back regularly and in full every month to improve your credit score. Be patient, and watch your credit score improve over the months.
Make sure to pay all of your accounts and bills fully and on time every month to build up good reliability in your borrowing, proving to lenders that you are responsible and a good choice to loan to. If you can, keep multiple accounts open and active, as well-managed accounts over a long period of time can really boost your [credit score].
Stay alert with your [credit] reports and keep an eye out for any errors or irregularities on your report that may affect your credit score. If you notice anything amiss, contact your credit providers and ask for the mistake to be rectified. Additionally, if you are out of work for a while or you spend time in hospital and miss payments as a result, notes can be add to your credit report to explain this to any lenders checking your [credit score].
Credit-scoring models lean towards rewarding those customers with mature, long-term credit accounts as well as using just a small portion of your credit allowance. Be vigilant and try not to miss any payments, as any blemishes will stay on your report for six years.
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