- Credit Building
- Credit Score
If your credit score is down then we have some good news for you: there’s plenty that you can do to give it a boost. Whether you’re looking to recover from a rocky patch or you are planning to apply for a mortgage, here are 30 credit-building tips that can help everyone (it's important to keep in mind that none of these tips are guaranteed to improve your credit score, but they are some of the things you can do to move in the right direction):
1. Check your credit file
As far as tips to building credit go, this has to be the easiest one to action. If you’re looking to achieve something then you need to know your starting point. There are a whole host of companies where you can sign up and see your credit score for free. Go ahead and do it now.
2. Get credit if you don’t have any
The best way to increase credit score is to actually get credit. If you have no credit history the lenders have no information to assess how likely you are to repay. Start small and take your time to build up your score.
3. Monitor your credit score regularly
Do you know your credit score right now? Are you happy that all of the information on your credit file is correct? If you’re not even sure what is on there then one of the best credit-building tips is to check your score regularly. With companies such as Credit Karma, ClearScore, and Experian you can even check your credit score on your mobile phone. It has never been easier to monitor your score.
4. Correct your file if needed
Mistakes happen! This is another reason why you should be checking your credit file. You don’t want your score being dragged down by incorrect information. If you spot something that isn’t quite right then you are entitled to have it corrected.
5. Open a bank account if you don’t already have one
Having a bank account shows lenders a couple of things that can be beneficial to you. It shows them that you have some stability. It also shows them that you have a way to receive money as well as make repayments. Being with a bank for a number of years is often useful and looks good in the eyes of a lender.
6. Check eligibility before you apply for credit
If you take a look at point 17, you’ll see that lots of credit applications are not a good thing when it comes to your credit score. Before you apply, many lenders now give the option of a soft search so that you can see the likelihood of you being accepted before a full credit check is carried out.
7. Get a credit card
Used sensibly credit cards are a useful tool that can give you a boost. Using only a small amount of what is available and then paying it off in full each month means that you won’t be paying any interest and clearing your debt in this way is what will see your credit score go up.
8. Sign up for a credit builder
Credit builders offer a simple solution to boosting your credit. You pay a fixed fee every month and this payment is reported to credit reference agencies. What is special about what we offer at Wollit is that we report to all three UK credit reference agencies.
9. Budget for your payments in advance
Before you even think about accepting access to credit, make sure that it is affordable. Make sure that you will be able to repay the amount every month without fail. When you are a week or two away from your payment date it is worth checking your account and making sure that the funds are going to be there. If they’re not then you at least have some time to take action. It is all too easy to click that pink Klarna button and not worry about payments at that moment, but you must be sure that when the time comes, the payments can be met. Buy now, pay later products can be beneficial, but failing to budget for the repayments can quickly destroy your credit score.
10. Monitor your credit utilisation rate
Just because you have access to credit doesn’t mean that you should be using it all. If you max out every credit card that you have, lenders may get a little nervous. There is no exact figure but there are sources that suggest using around 20% - 30% of your available credit is viewed favourably.
11. Make regular payments on your debt
In terms of tips for building credit, this is the one that can have the biggest impact. Make sure that you are paying your debts. Make sure that your payments are on time. The best way to do this is to set up direct debits so that regular payments are being made every month. Missing payments will see your credit score tumbling. If you reach a point where a payment is going to be an issue then you need to talk to your creditor as soon as possible. By communicating you may be able to buy yourself some time and prevent a missed/late payment showing on your credit file.
12. Clear your debts
Clearing your debts shows lenders that you can manage your money responsibly and that you can be trusted to stick to your commitments. If you want to see your credit score go up quickly it is worth paying off any low-level debt that you have: completely clearing a balance is what sees the biggest changes.
13. Resolve old debt or disputes
Do you have debt that you haven’t managed to clear? Perhaps it’s been owed for a while. Perhaps you don’t even feel that you owe it. Regardless, while it is sat on your file it will be harming your credit score. One of the most common issues that people find is that old mobile phone contracts are still showing on their files. If this keeps showing as a default each month you are not going to have much success boosting your credit score. A resolution, one way or the other, can see it removed and you can start improving your score.
14. Watch how many times you apply for credit
Applying for credit isn’t in itself a bad thing. The truth is that lenders can see that you have applied but do not see if you were successful or not. If they see numerous applications in a short period of time they assume the worst. The impression is that you are struggling to manage your finances and this means that you’ll end being rejected by many lenders.
15. Unlink old financial partners
You may have an ex-partner or spouse who you are financially linked to. The link will only have been created if you had some sort of credit in joint names or if you had a joint bank account. If you’ve since gone your separate ways then now is the time to remove the link: you don’t want your credit score to suffer because your ex is less financially responsible than you!
16. Get on the electoral roll
If not the best way to increase credit score, this is certainly one of the fastest. Lenders like to know that you are who you say you are. They also feel more secure if they know where you are and that you have some roots. Getting yourself on the electoral roll takes seconds and can give your credit score a quick boost.
17. Get bills under your name
Certain utility bills, such as gas and mobile phone contracts, are classed as a form of credit. Having these bills in your name can send your credit score in the right direction - providing that you are paying them on time, of course.
18. Report your rent
While homeowners get their mortgage payments reported to credit reference agencies, for a long time tenants saw no benefit from paying on time. That all changed in 2016. Assuming these are always on time, you will see your credit score going up.
19. Use subscription payments on your credit card and pay them off in full
If you have monthly subscriptions that you know you’re going to have to pay anyway, using your credit card for these is a great idea. If you are already using Netflix then you have already committed to paying that amount every month. If you set your credit card as the payment method you will also know exactly how much you need to pay on this each month. Paying for a subscription like this keeps your credit utilisation low as well as allowing you to clear your balance in full every month. By using your credit card for this, even if you did nothing else, you will see your credit score increase.
20. Keep old accounts open to have a higher credit limit
If you have credit cards, or other lines of credit, that you are no longer using it is worth keeping these accounts open. If they are clear of debt what you are showing a lender is that you have access to credit but are keeping the use of it low. If you can show a high credit limit that is being managed you will see that this increases the trust of lenders.
21. Consider consolidating debts
By bringing your debts together into one consolidation loan you will be lowering your monthly repayments. A lower interest rate will be saving you money each month which makes it easier for you to stay on top of your finances. By using the loan to clear your other debts, there will also be a boost to your score for settling these accounts.
22. Try Experian Boost
Experian Boost monitors your bank account and sees when you pay into an ISA, pay your council tax, or make payments to the likes of Netflix and Spotify. Making these payments show that you are dependable and honour your commitments and so leads to a boost to your credit score.
23. Look out for identity or credit fraud
If someone is using your identity to obtain credit, this is going to bring your credit score crashing down! With unpaid debts in your name, it could cause untold damage. Make sure that you are monitoring your credit report. If you spot something that isn’t you, report it.
24. Avoid CCJs and bankruptcy
These may not always be avoidable, but you should do all that you can to stay away from them. CCJS and bankruptcy will bring your credit rating down almost instantly. They see you blacklisted by creditors and this means that being accepted for credit in the future will be extremely difficult. These records stay on your file for 6 years and you will need to take steps to recover your credit score during, and after, this time.
25. Speak to your lenders if you can’t repay
If you hit hard times it is important to talk. There are times when lenders can give you a little breathing space so that you can protect your credit score. The old adage ‘if you don’t ask you don’t get’ applies here.
26. Pay more than the minimum on your credit card
As well as seeing you pay far more interest in the long term, only making the minimum payments suggests to lenders that you are struggling. In fact, only making the minimum payment could see your credit card company intervene and suspend your line of credit. There are times when the credit card company are actually part of the problem. It is common for them to set up minimum payments as a default. You need to check this and switch to clearing the full balance instead.
27. Never miss a repayment
This is maybe the most obvious of all credit building tips, but paying on time every time is one of the best things that you can do for your credit score. Every payment builds a picture and shows lenders that you are responsible and can manage your money.
28. Become an authorised user on a credit card
When taking this root, make sure that the main cardholder is someone that you can trust. While a well-managed account can give your credit score a boost if there are missed or late payments, these can harm you too.
29. Ask for a higher credit limit if you can
If you have managed your credit well, it is more than likely that you will see your limits increased. If this hasn’t happened just yet, you can go ahead and ask. A higher limit doesn’t mean that you have to use more credit. What it does mean is that your credit utilisation will look even better.
30. Use credit little and often
When it comes to credit building tips, the key message is that you are wanting to demonstrate to lenders that you are responsible. How you use your credit sends a message to lenders. If you are looking for a boost, then little and often is the way to go.
