How to improve your credit score

Building a good credit score is crucial to purchasing a home or applying for car finance as it can have a detrimental effect on your ability to borrow money or take out any credit cards or loans. There are apps available on the market that allow you to view your score for free. If you find that your rating needs improving significantly then there are numerous steps you can take to strengthen your score so don’t panic, it will just take some time and dedication.

If you are looking at obtaining a mortgage for a new property, you should make sure that your credit score is as good as it can possibly be, particularly if you are trying to become accepted for a mortgage that is different from a traditional mortgage as these are often harder to obtain.

Buy to let mortgages are becoming more common as property investment has grown dramatically in popularity over the years. People are not only purchasing properties to produce a second income alongside their main day to day job, but there has also been a considerable rise in the amount of people that are turning to ‘flipping’ property as a way of boosting their monthly income.

However, this is only possible if you have a good credit score in the first place. As property investment is becoming more lucrative and enticing more people, there has been a growth in the number of companies across the UK that are providing healthy opportunities for investment. However, some property companies such as RW Invest, require their investors to pay the full amount of the property upfront rather than using a buy to let mortgage.

If you are eager to invest in buy to let property but don’t feel your credit score is currently up to scratch, purchasing a property in this way can be a good solution to help you enter the property ladder. This way, you can benefit from property investment while still working on improving your credit score in the meantime. If you don’t have the money upfront, however, you will need a buy to let or regular mortgage. Here’s how to boost your credit score and better you chances of securing your mortgage.

What exactly is a credit score?

This is created from information held in your credit file which allows companies to decide how much you are allowed to borrow, how much interest to charge you or even if they want to lend to you at all. The most recent information will have the most impact as lenders are only concerned with your current financial setup. However, your financial decisions from the last six years will be available on record. If you have missed a few payments over the years or paid your mortgage slightly late some months, then you may be charged a higher interest by lenders, or are simply ineligible and lenders view you as a higher risk case.

How long will it take to improve?

Your credit score is an accumulation over time and will get better as the number of on-time payments increase. If you leave any outstanding bills for a longer period, the greater the impact on your score. If you wish to boost your credit score, then follow these steps to start improving this right away.

Pay your bills on time

This goes without saying and is one of the essential rules to follow if you wish to improve your credit score. Pay via phone or direct debit, as any way of paying is a way to prove to lenders that you can manage your money effectively and on time.

Check your file for errors

Any errors on your file can have a detrimental effect on your score, even something as simple as having the wrong address. Make sure you check all your details thoroughly and report incorrect information immediately.

Register for the electoral roll

If your name is not on the electoral role, you may struggle to get credit. You can register to vote online or by post.

Are you linked to another person?

Do you hold a joint account with another person? If you have a friend, family member or other half that has a poor credit score, this will also reflect badly on yours.

Moving location

Lenders can sometimes feel reluctant to lend to someone that has lived in numerous addresses over a short period of time. In order for them to feel more comfortable lending to you then you should ensure you have lived at one address for a considerable amount of time.

Levels of debt

What are your levels of debt like? Ideally, you shouldn’t have any debt at all and you should think about paying any outstanding credit before applying for new credit. If you have a build-up of existing debt, companies will be hesitant about lending you money if you already have existing finances you need to pay.