Know your credit score and how to manage it.
Posted on 25 May, 2023
Whilst at Advantage Finance we pride ourselves on seeing the person behind the numbers, it is still true that your credit score is a really important factor in your financial life. It determines your ability to access credit, such as loans and credit cards, and the interest rates you will pay for them. Having a good credit score can save you a lot of money in the long run and make it easier to achieve your financial goals. That’s why not only do we support those who have had credit hiccups in the past we want to help them to move towards a brighter future, and looking to improve your credit score is a great way of doing this. Here are some steps that could help you:
- Check your credit report The first step to improving your credit score is to get a copy of your credit report. You're entitled to one free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) every year. Review your report for errors or inaccuracies, such as incorrect account information or late payments that you actually made on time. If you find any errors, you can dispute them with the credit bureau
- Pay your bills on time Your payment history is the most significant factor in your credit score, accounting for 35% of it. Late pay-ments can stay on your credit report for up to seven years, so it's crucial to pay your bills on time. Set up automatic payments or reminders to ensure you don't miss any payments.
- Reduce your credit card balances Your credit utilisation ratio is the amount of credit you're using compared to your credit limit. A high credit utilisation ratio can hurt your credit score, as it suggests you're relying too much on credit. Try to keep your credit utilisation ratio below 30% by paying down your balances or increasing your credit limit.
- Don’t close used credit cards Closing a credit card can actually hurt your credit score. It reduces your available credit, which can increase your credit utilisation ratio. If you have an unused credit card, keep it open and use it occasionally to keep the account active.
- Avoid frequent credit applications Each time you apply for credit, it generates a hard inquiry on your credit report, which can lower your score. Try to limit your credit applications and only apply when necessary.
- Build credit history If you have limited credit history, it can be challenging to build a good credit score. Consider getting a se-cured credit card, which requires a deposit but can help you establish credit. You can also ask someone with good credit to add you as an authorised user on their credit card, which can help you build credit.
Improving your credit score takes time and effort, but it's worth it in the long run. As long as you are managing your finances well, these steps could help you improve your credit score and give you more fi-nancial options in life. Remember to monitor your credit report regularly and stay on top of your payments to maintain a good credit score.