Improve My Credit Score

Having a bad credit score negatively affects many areas of your life. It could prevent you from being approved for credit cards, vehicle leases and even mortgages.

People with a low credit score are seen as high risk borrowers, and typically pay higher fees and interest rates than people with a good credit score, adding to their debts. Many people feel overwhelmed by the impact of their poor credit score, but it's possible to improve it by applying some basic methods.

Your FICO score is calculated from reports compiled by credit bureaus, and are based on five things; payment history, credit amount, length of credit history, recent credit applications and the type of credit you have. The biggest two influences on your score are your payment history and amount of outstanding credit. These two things total 65% of your total score alone. Improving your credit score takes time, and unfortunately there are no quick fixes. The first thing you should do is find out your credit score, and check your report for anything that you think looks incorrect. You can appeal to have incorrect information removed from your report, which could raise your credit score.

Although obvious to many, the most effective way of increasing your credit rating is to pay-off your outstanding credit and make repayments on time. Missing payments severely damages your credit score, but this can be reversed by future good credit management.

It might help to make a list of all your outstanding credit, the minimum repayment amounts and the repayment dates. Create payment reminders on your phone, computer or calendar, and try to pay more than the minimum amounts to reduce your debt.

Moving credit around and closing accounts can help improve your short-term score, although it's not an effective long-term strategy. Moving your debts to a credit account with a lower interest rate can help you meet your repayments, but it will impact on the length of your credit history. Having one credit account for a long time is better than having lots of accounts for short periods.

People who have never used credit will have a poor score even though they haven't been in debt before. This is because they aren't able to build a credit history, which shows providers that they can meet their repayments. Although it can be difficult applying for credit when you have a low score, there are many products specifically aimed at this market.

Secure credit cards are relatively easy to obtain if you have a poor credit score, as they're secured against a deposit. These often have lower interest rates than a classic credit card, and will allow you to build a credit rating slowly.

The amount of credit you use also has a big effect on your score. It's important not to use all of your available credit, because this can suggest financial difficulty, and you might struggle to repay your debt.

There is no quick or magic way to increase your credit score, and many of the things you should do are common sense. It's important to use credit but only if managed responsibly.

Read a copy of your credit report and contest any incorrect information. Don't miss repayments and try to pay more than the minimum requirement. Raise the credit limit on your existing account rather than closing it, to create a longer credit history. All of these things will help to improve your long-term credit score, and place you in a better financial position.

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