How to increase your credit score: 7 ways
What’s a credit score?
“A credit score is a numerical expression based on a level analysis of a person’s credit files, to represent the creditworthiness of an individual. A credit score is primarily based on a credit report, information typically sourced from credit bureaus.”-Wikipedia
What’s a good credit score?
According to the FICO credit scoring model which scores range from 300-850, a score of 700 and over is usually good.
Why is a good credit score important?
A good credit score can be important because it can make it easier for you to get a loan or any other type of credit because banks or other financial institutions see you as a lower risk. It can also reduce the cost of borrowing because some providers may charge you a lower rate if you have a good credit score, the terms provided may also be better. Similarly, you’ll overall have a wider choice of credit, with better terms and better rates. Others include:
- Get access to a wider range of financial services such as loans, credit cards
- Get better rates, with a good credit score you have access to a wider range of providers so you can pick the ones with the best rates
- Get cheaper credit, with a good credit score, in some cases, you might be able to get credit with lower interest rates such as a mortgage for the purchase of a property
- Get better terms, with a good credit score you might be able to negotiate on certain terms like your credit limit
- Qualify for insurance products with lower premiums
Consequences of a bad credit score
- Its difficult to get loans like a mortgage loan and other credit
- If you do manage to get a loan you’ll usually end up paying higher rates, but this may mainly come down to the source of provider being used eg. if you use payday lender you’ll pay much higher rates
- May also make it difficult to secure rent
- It may also be difficult to get certain job roles, like jobs that include handling money or even some management roles because your employer will want to know that you can be trusted with making budgeting decisions and that you can make overall good financial decisions
- Higher insurance premiums, the reason behind which is that a research showed a correlation between bad credit scores and the likeliness of issuing a claim
- Utility companies may charge you a deposit if you have a low credit score
Ways to increase your credit score
- Keep your credit utilisation low, try to use less than 30% of your credit limit
- Check your credit report for any mistakes and if you find a mistake report it to your provider and ask them to update or change the information
- Don’t apply for too much credit
- Pay back any borrowing on time
- Try not to default or miss payments
- Register to vote
- Avoid multiple credit applications at the same time
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