It’s difficult to really get too excited when you think about debt. It’s not something anyone consciously aspires towards, and some of the statistics relating to debt in the UK are pretty frightening. But one also has to work past natural stigmas and prejudices to consider the two different kinds of debt: constructive and ruinous.
And the former is one which should be embraced when appropriate, and accepted as a force for good. For example, a mortgage is a vital means through which to become a homeowner, personal loans can enhance your life when it comes to things like purchasing a car, or even improve your net worth if it is for something like home improvements.
All of these are dependent on the debt being affordable, and preferably even cheap. So, how to access cheap credit? Aside from the fact that tumbling interest rates continue to help the cause, your credit score is arguably the biggest factor of all. The key is to optimise it as best you can, and, luckily, it’s actually pretty simple…
It may seem a strange one, but by simply staying at the same address for an extended period of time, your credit rating will be enhanced. Ideally, at the time of applying for credit, you will want to have been registered at the same address for three years or more.
Register on the electoral roll
Whatever your thoughts on politics, getting yourself on the voters’ roll is a no-brainer in terms of your credit score. Like staying at the same address, it demonstrates to a would-be creditor that you aren’t someone prone to transient behaviour, and are thus easily traceable. It doesn’t even matter if you actually vote or not!
Don’t shy away from credit
One of the reasons students in particular struggle to gain credit is because they have not built up a credit rating. Quite simply, having no credit history is as bad as having a poor one. So, as far as possible, you will want to open multiple lines of credit. That doesn’t just exclusively pertain to credit cards or loans either. Even something like a mobile phone contract is an important way of demonstrating an ability to meet obligations.
Know your limits
Someone who maxes their credit card and overdraft limits each month will not only make themselves unappealing to lenders, but also damage their credit score. As mentioned above, it is important to have a number of lines of credit open. But use them wisely. Using your credit card each month is a good thing, and can even allow you to capitilise on perks and rewards. However, it is only beneficial if you are able to clear your balance each month – or at least pay off a significant chunk.
Check your report
It has now become pretty standard to be able to get hold of your credit report free of charge, especially with the arrival of companies like Noddle and ClearScore. It’s highly advisable to do so as well, because mistakes do happen, and given that a credit file factors in the preceding six years, you’ll want to make sure there are no undue black marks in there which are holding you back.
Be careful when you apply
When the time comes to apply for a loan, or even just a credit card, you need to be a bit careful. Usually, when you merely apply for a quote, the company will simply do what is called a ‘soft search’ on your credit file, thus not leaving any footprints. However, each time you actually complete an application, it is likely that a hard search will be conducted, which will reflect in your file. As such, you need to be selective about who you apply with. Otherwise if you’ve gone on a mass application spree, it may be interpreted by lenders that you are in a desperate situation – something which can undo all the good work you’ve done with the above!
I hope you find these tips on how to improve your credit score helpful.
*This is a collaborated post