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Checking and improving your credit score can feel lIke one of life’s mundane tasks, but we speak to two money experts who share easy ways to boost your credit score
If you feel baffled by the ins and outs of credit scores, you’re not alone.
Anyone in their twenties will know how exhausting the financial landscape is right now – you’re trying to rise on the career ladder, push out of your comfort zone to enjoy new experiences and nurture friendships, all while staying afloat – and have money to pay for rent. God forbid if we buy an avocado or two.
Sometimes it can feel easier to bury your head under the sand when it comes to improving your credit score, but it’s less daunting than it seems – as there are simple steps you can take to help build things up.
Having a good credit score means you have a better chance of getting a mortgage in the future, a loan and overall financial control. Although, if you don’t right now, there’s no need to worry as we spoke to two money experts about how you can improve your credit rating.
Polly Gilbert, from Tembo mortgage brokers, said that although looking at your credit history is one of those grisly “life admin” tasks – it’s usually left and ignored until it’s too late. She explained that your “creditworthiness” can be damaged very quickly, and said positive changes are “slower to take effect so, the earlier you get to grips with it, the better”.
According to Polly, your twenties are the perfect opportunity to do so. “First up is to understand what your credit position is,” she said, and to then make sure it’s accurate. “If you aren’t happy with the score you see, don’t panic. There’s plenty you can do to improve your position, and the more time you have to do it the better.”
The Mirror also spoke to Liz Hunter, director at financial comparison site Money Expert, who has shared some of her top tips to improve your score.
Specialised credit building credit cards
Money pro Liz recommends looking into a specialised credit card that is designed to improve or build your credit rating. She explained: “These types of credit cards work exactly the same as any conventional credit card, however, they often have a lower spending limit and a high APR, which gives you the incentive to ensure you’re paying the balance off in full every month.”
Liz added that over time, by using the credit cards, you will demonstrate your ability to use credit responsibly, and this will then be reflected on your credit report. However, you must pay off the balance in full every month as the high interest rates could add more to the total you need to pay.
Polly agreed and added: “This can seem slightly counterintuitive, but you need to be able to show over time that you’re able to borrow and repay money. Don’t use more than 20% of your full limit on any credit card you take out, and try to make your repayments in full, and always on time. Set-up a direct debit to make sure you’re at least paying off the minimum every month, and to ensure you never miss a repayment.”
Avoid late payments on bills and buy now pay later
While it can be tempting to use pay-later sites such as Klarna, you can risk having a black mark next to your credit score if you pay late. This warning also applies to late payments on phone bills, insurance payments and credit card bills.
“Some companies do provide a small grace period for missed payments, however missing payments regularly will show up on your credit score and can affect you obtaining financial products such as credit cards, mortgages and loans in the future,” Liz said.
Polly added: “In general, be on top of your outgoing commitments, whether that’s phone bills, parking fines or loans, make sure you pay on time. One thing we see a lot is people using joint accounts for bills but failing to fund them in time, leading to regular missed payments.”
Register for the electoral roll
This is one of the easiest ways to boost your credit score, Liz says. Simply proving where you live by registering for the electoral roll, even if you don’t plan on voting in elections, means that all all your details will be contained within your credit report, making it easier for lenders to confirm your identity and where you live.
Try to stay at one address if possible
This one is tricky, but living in the same place long-term can help boost your chances of getting credit. “It shows lenders that you have stability within your life and can meet rent and mortgage repayments on time, helping to build your credit score further,” Liz said.
“Young people in their twenties are likely to be renters, therefore may be tempted to move around more often to find a home that suits their needs. If you move frequently, lenders could potentially see this as a negative, such as the inability to pay the rent or bills for the property.”
Don’t apply for too many credit products
Every time you apply for a credit product such as a credit card, loan, phone contract or insurance policy – it will show on your credit report.
“Applying for multiple credit products in a short space of time could potentially set alarm bells ringing for lenders who may assume you’re desperate to obtain credit from them. To combat this issue, prioritise the credit products you need the most, and stagger the application process over several months to ensure a better chance of being accepted by the lender,” money guru Liz warns.
She further suggested taking advantage of eligibility calculators on lenders websites or comparison sites. These will give you a good idea as to whether you will be accepted or not before you apply.
Avoid withdrawing cash using a credit card
“Each time you withdraw cash using a credit card, it’s noted on your credit report and could look like you’re struggling financially or have poor money management,” the money expert explained. It’s best to only withdraw cash from a credit card in emergencies to avoid additional charges and a hit on your credit score.
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