Your credit score is really important and will play a massive part in your financial life. Your credit score will usually be checked when you apply for a number of things in life such as mobile phone contracts, car finance, mortgages, broadband and even some jobs! You credit score is an indication to finance lenders whether you are good at managing your finances or not. Things that can decrease your credit score can include missed payments, debt, bankruptcy, multiple credit searches on your file, defaults and more. If you can relate to any of these then you may find yourself with a bad credit rating. Alternatively, you may find yourself with a low credit rating because you haven’t taken out any credit in the past.  Refused Car Finance have put together a number of ways you can increase your credit score in the right way. Like anything that needs to be rebuilt, it usually takes time and this is no different when it comes to your credit score.

Check your credit report yourself

The first thing you should do is check your credit report and credit score yourself. Before you can improve your credit, you should be aware of where you currently fall on the credit scale and what is holding you back. You can check your credit file for free online. If there are any mistakes on your file or any fraudulent activity, this can seriously affect your score. Also, if you and a partner have previously taken out credit together, you will become financially linked. If your financial partner has bad credit, this can also decrease your score.

Reduce your debt
We know it’s easier said than done but the best thing you can do to improve your credit score is to reduce the amount of debt you currently owe. It’s a good idea to spend a good few months paying off the debt you owe to put you in the best financial position when applying for any sort of credit. Make sure you at least make the minimum payment on any debts that you owe each month. Get your finances in order by working out your incomings and outgoings and set yourself a budget for your disposable income.

Use a credit building card
If you currently have no credit and want to start building your credit score, a credit building card is a great idea. It also helps with building your credit from a low credit score. You can easily increase your credit score by making a few purchases on your card each month and then paying off the balance. These cards should be used primarily for building credit when you don’t have credit. It shouldn’t be used as an instant answer to any financial problems.

Set up payment reminders

Missed payments can seriously affect your credit score. If you find yourself with bad credit this may be due to regularly missing payments or late payments on bills or credit cards. It’s a good idea to have a direct debit set up for all your outgoings each month. If you get paid on the same day each month, why not schedule all your direct debits to go out the day after you get paid to make sure you’re up to date on all payments. Alternatively, you could use a calendar, automatic reminders or notifications to remind you when payment is due.

Save for a rainy day

If you are trying to pay off all your debts, it can be hard to save money. However, having an emergency fund can be really beneficial. Putting a small amount of money away each month can quickly build up and it means that you have a bit of money as a back-up. If you find yourself struggling to meet all your financial obligations one month, you can use your savings to help you along and avoid any missed payments. Unless you have 0% interest on your debts though, it’s best to pay off all your debts first before you start saving!

Close any unused accounts

When a credit lender checks your credit file or report, they will look at the amount of credit you have available to you. If you have numerous bank accounts, credit cards, store cards or loans, lenders may think you can’t handle any more credit. It’s good to be able to show that you can manage your active accounts effectively but any accounts that you don’t use and no longer need should be closed.

Make all your payments on time

This one sounds obvious but you’d be surprised how many people fall down here. As mentioned, you should set up reminders to make sure you don’t miss any payments. Lenders want to know that you can be trusted to pay back any money you owe. If you were applying for something like bad credit car finance, it’s a good idea to make all your payments on time for at least 3 months in the run up to a car finance application.

 

Register on the electoral roll

This is one of the easiest things you can do to improve your credit score. When you register on the electoral roll, you are essentially registering to vote. Even if you have no interest in voting, it’s good to be on the electoral roll. The electoral roll can be used by lenders to verify where you live and how long you have lived there for.

Take out a small overdraft

If you already have a UK bank account open, you may want to consider asking your bank for an overdraft. A small overdraft is classed as a form of credit and having one can help you improve your credit score. Before you apply for an overdraft, make sure you check the interest rate as some overdrafts can have quite high interest rates.