How To Improve Your Credit Score

When submitting your mortgage application, your lender will consider your credit score. A strong credit score is important to putting your application in the best stead of being approved. Whether you don’t know your credit score right now, or you’re nervous it’s too low, we’ve created a simple checklist to help you improve it.

What is a credit score?

A credit score is a three-digit number that is used to demonstrate how financially reliable you are to a lender. It’s based on a number of factors, predominantly your credit history, including how timely you are at paying off your bills. A low score indicates a higher risk to lenders, whereas a higher score indicates a lower risk.

 

What is a good credit score?

As each credit reference agency uses a different numerical range, there is no set figure for a ‘good’ credit score. There are three credit reference agencies: Experian, Equifax and TransUnion.

Experian’s credit score is out of 999 and they deem a good credit score to be upwards of 881. Equifax’s credit score is out of 700 and upwards of 420 is classed as good. TransUnion’s credit score is out of 710, and a good credit score is classed as 604 and above.

 

What credit score do I need to buy a house?

As the figure for a good credit score varies between credit reference agencies, there’s no set credit score you need to buy a house. So rather than focussing on one specific number, you should simply do everything you can to improve your credit score to make you more appealing to a lender. It is important to remember that a good credit rating is not enough to guarantee a mortgage offer, affordability and other criteria are key too.

 

How can I improve my credit score?

  • Using a credit card and paying it off regularly

    It’s often a false assumption that spending money on your credit card can negatively impact your credit score. In fact, the opposite is true. The best way to use a credit card to improve your score is to spend on it little and often, ensuring you pay your credit card bill regularly when it is due. This then signals that you are a reliable investment for a lender, improving your credit score.
     
  • Register to vote

    Registering on the electoral roll can improve your credit rating as your electoral details are adding to your credit report. This allows lenders to confirm the legitimacy of your name and address details, boosting your credit score as a result.
     
  • Pay your bills on time

    Paying your bills on time signifies that you can be relied on to return owed credit on time, and therefore boosts your credit score. Missing a payment can be detrimental to your credit score. It is important that you talk to your providers if you are struggling to make payments.
     
  • Make sure all the details on your report are correct

    The slightest mistake on your credit report can impact your score, so it’s important that you go through your report to pick up on and amend any errors. Once the mistakes are resolved, your credit rating may improve as a result.
     
  • Understand your credit utilisation

    If you have low available credit, prospective lenders may see this as a sign that you’re not successfully managing your finances.

    While regular credit card transactions (when paid on time) can improve your credit rating, it’s important to emphasise that this does not mean utilising your entire credit limit each month. In fact, using less of your credit limit makes you appear more trustworthy to lenders and helps lift your credit score.

    Before applying for your mortgage, you may want to pay off any outstanding debt that you may have. This will both improve your credit score and ensure you minimise any chance of a lender deeming you as a risk.

 

How long does it take to build my credit score?

A credit score can be built in around three to six months. However, if you’re trying to improve a low credit score, it will typically only improve a few points each month. The sooner you can implement some of the suggestions above, the better.

Unfortunately it’s much easier to damage your credit score, as one late or missed payment can reduce it.

 

How do I keep my credit score healthy?

Keeping your credit score healthy comes from:

  • Paying all your bills on time
  • Paying off your credit card on time
  • Not using too much of your credit limit
  • Not getting into debt
  • Limiting how many credit applications you make

Looking to get a mortgage? We have a range of mortgages to help you. Book an appointment with one of our advisors today for help. If you want more advice on how to build a strong mortgage application, check out our six tips on applying for your first mortgage.

 

Your mortgage will be secured on your home. Your home may be repossessed if you do not keep up repayments on your mortgage.

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