How to improve your credit score. An introductionBut firstly my name is Dan, I am a CeMAP qualified mortgage & protection adviser. This video is purely for educational purposes only, and should not be seen as advice or a recommendation to act.
With that out of the way, on with the video.
I want to cover this subject, as it is something I often get asked about. Towards the end of this video, I will let you know how to improve your credit score, I have put a link in the description to the timestamp to this part of the video, but first I want to answer a few questions I get asked often, such as what is a credit score, how do you check your credit score and what is a good credit score.
Firstly, what is a credit score?Your credit score is created from the information held in your credit report, also known as your credit file.
It helps lenders decide whether or not they’ll lend to you, and if so, how much can you borrow and also at what interest rate. This is because lenders believe they might be taking a higher risk when lending to people with a lower score.
The more recent information recorded on your credit profile, the more impact it can have on the lender’s decision, as this is a better picture of what you’re currently like with handling finances.
I strongly recommend you review your credit report often as this helps you quickly flag any fraudulent activity or mistakes on it. Rather than finding this out when it’s too late and you need to make an application.
How do you check your credit score?There are multiple credit reference agencies out there, the main ones are Equifax, Experian, TransUnion, and Crediva. They all hold information on you, which lenders use. Even small errors can cause problems, so it’s important you check through your credit report. As I’ve already mentioned, it is best practice to regularly check your credit profile to make sure no errors have occurred.
If you sign up to CheckMyFile using the link in the description you will be able to check your credit score and history on Equifax, Experian, TransUnion, and Crediva all with the 1 login, this is important because not all lenders use the same credit report, so you need to check you can see everything they’ll be able to see before applying, as different lenders, accept different levels of credit scores and credit history.
Towards the end of this video, I will provide you with more information on CheckMyFile.
So, what is a good credit score?This is a bit of an open-ended question, as different agencies have different definitions of what a good score is. At the time of recording, with Equifax a score of 420 or above is classed as good, Experian it is 880 or above and TransUnion 781 and above.
But please be aware that a lender’s decision is not made solely on the score. They have their own scoring system as well.
So, how can you improve your credit score?If you have a low credit rating, there are several things you can do to improve it.
Firstly, make sure you’re registered on the Electoral Roll which can be done via the Government’s website
Check for mistakes on your credit profile. This one is quite common. Something as simple as having the wrong address can affect your score. I have also seen instances where companies have wrongly registered missed or late payments, so check those too!
Pay your bills on time. This one may be obvious but you need to demonstrate to the lender you’re responsible with your finances. People often take credit cards out, off the back of advice from others but fall into the trap of not paying the balance off in full. If you’re going to do this, only place a small, affordable amount on the card and make sure you clear it in full the same day. This way you can’t forget and affect your credit further.
Check if you’re linked to another person. Having a spouse, friend, or family member’s credit rating linked to yours through a joint account could affect your personal rating if they have a poor score.
Check for fraudulent activity, as mentioned earlier, late or missed payments have been known to be recorded against people’s credit profiles. It is also more common than we’d like to see where fraudulent activity has taken place and debt has been recorded in an innocent person’s name.
Avoid moving home a lot. Lenders feel more comfortable if they see that you’ve lived at one address for a considerable period of time.
Keep your credit utilisation low. Your credit utilisation is how much of your available credit limit you use. For example, if you have a credit limit of £2,000 and you’ve used £1,000 of that, your credit utilisation is 50%, so you’re using half of your credit limit. Usually, using less of your available credit will be seen positively by lenders, and will increase your credit score.
What information is in a credit report?Each agency holds slightly different information about you. So it’s worth checking all of them to gain a more accurate breakdown of the information they hold on you.
Typically they all hold your name, date of birth, and address and if you’re registered on the electoral roll. Whether any credit searches have been carried out against you, financial links to other people, and details of any late payments, missed payments, defaults, and county court judgments.
Earlier on I mentioned signing up with CheckMyFile, this is because it is a very helpful utility at your fingertips. There is 1 sign up process and they cover all 4 of the credit search companies I mentioned. They also have a 30-day free trial.
There are other websites that will be free for life, but they don’t often provide all the relevant information which is required to make a successful mortgage application.
It is free for 30 days but if you wish to keep viewing your credit report after the 30 days, so you can keep an eye on your credit score and history, there is a monthly subscription cost of £14.99. To avoid this, you could sign up to each of the credit reference agencies separately and utilise their 30 day free trials. If you did continue to use CheckMyFile after 30 days, I receive a £12 referral fee.
Remember your home may be repossessed if you do not keep up with the repayments on your mortgage.
I have hopefully provided you with the information you visited this video for, if you have any questions, please put a comment below and lookout for a video on how to read your credit report. If you find this information helpful, subscribe and then you’ll know when I have provided new content. See you next week