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What is my credit score?

Do you know how to increase your credit score? Do you even know what your credit score is right now? The answer from most people is no. It’s something lots of people don’t think about until they need to. If this includes you then don’t worry as we will cover everything you need to know about credit, in this article.

What is my credit score and how do I check it?

Firstly, it’s important that you understand what credit score is. Put simply, your credit score is a measure of how likely you are to pay back borrowed money. Having a higher credit score means you’re considered a lower risk by lenders.

The higher your score is, the more likely lenders are to approve loans, mortgages, credit cards, and other types of borrowing. On top of this they will be more likely to give you better interest rates for loans that you do take out.

To check your score, simply go to a credit reference agency. Experian, Equifax, and Trans Union will all give you access to a free credit report.

How do I increase my credit score?

Increasing your credit score sounds like it would be complicated, but it is only a matter of playing the game and understanding the rules. The game is simple, pay back what you borrow, and your score goes up. However, there are other ways to increase your credit score.

Did you know that registering on the Electoral Roll will improve your credit score? If not, you’re not alone as many people don’t realise this. Making sure you’re registered at your current address will immediately increase your credit score. It’s as simple and easy as that.

Bills Bills Bills. It’s not just about paying them; it’s about doing it on time. This goes for all bills, credit cards, mortgage, and anything else that you owe. This will affect your credit score significantly, as if you can’t be trusted to pay your bills right now, why should a lender trust you to repay a loan?
If you need to increase your credit score this is a must, you cannot make late payments. If this is something you struggle with, then set up a direct debit or standing order so you don’t miss payments.

Diversify. Taking out different types of credit can help your score. Having a range of types of credit, all being paid on time, shows that you can manage multiple credits at once and shows that you’re an even more trustworthy candidate for future credit.  A mix of services like a credit card and mortgage are needed to make this work. If you do this, make sure you can afford everything you’re borrowing. Not paying it back in full and on time will lower your score.

For How Long? The amount of time you’ve taken out credit for will affect your score. Credit companies see a mix of older and newer credit as a sign of stability over time. Although this isn’t helpful for people looking for an instant credit boost, if you’re planning for the long term this is something you should keep in mind.

You don’t have to use it all. If you have a credit card, for example, don’t wildly spend with it. Spending close to your limits makes you seem unreliable to lenders, and only making the minimum payment each month will make you appear as a higher risk. Try to use no more than 30% of the maximum credit possible. This shows that you spend responsibly and can manage your habits. This will again increase your credit score.

Borrow some to borrow more. There’s a small irony in lending, in which you’re considered unreliable for not borrowing in the first place. If you’ve not borrowed before then you haven’t paid anything back and if you haven’t paid anything back, there’s nothing to show that you will do so in the future. Start borrowing early and in small amounts you know you can pay off; this will help you in the future.

How to play the credit score game

The game is simple, pay back what you borrow, on time and in full, and your score goes up. All credit scores consists of is the likelihood that you will pay off your next loan based on how you have borrowed in the past.

The best way to improve your score is to start early; borrow small in a variety of credit types that you know you can pay on time. If you do take out a credit card, only use 30% of the maximum credit limit available to you.

Your credit score is to see if lenders can trust you, but my final bit of advice would be to make sure you trust them. Always read the terms and conditions carefully and plan beforehand to make sure you can afford the payments. There’s no point in doing any of this if your score ends up going down because you didn’t plan properly.

As always, stay safe and good luck increasing your credit score.

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