How To Improve Your Credit Score Fast

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From registering to vote, to correcting errors on your credit reports, there are things you can do to improve your credit score fast.

What is a credit score?

Your credit score or credit rating is a score or a number assigned to you as a person. It allows financial organizations and bodies like banks, loan companies, and mortgage providers to estimate how good you are with money.

The score helps these organizations to determine how much loan they can give you. They can easily evaluate how well you can pay back loans or credit cards. 

A credit score is a measure of your financial ability when it comes to loans and how well you can manage debt.

What does a low credit score signify?

If your credit score is low, it tells your lender or financial institution that you might not be so good with money and may not pay it back quickly. It can also tell them you have not had debt for long enough. 

A low credit score may also mean that you are less likely to get credit and loans than you need or get them at a higher interest rate because they do not trust you enough.

However, if your credit score is high, it tells lenders and financial institutions good things about you.

It shows you are financially stable and that they can afford to give you a loan at a lower interest.

There are credit and loans that will only become available to you as your credit score increases. It is important to improve your credit score so that you can get better interest on credits.

How do you know your credit rating?

The two main bodies that issue credit rates in the UK are Experian and Equifax. These platforms allows you to check whether you have a low or high credit rating.

For you to improve your credit score, you must first understand why you are having low credit ratings.

Here are 8 possible reasons your credit score is low:

1. Late or Missed Payment

When the payment on your credit card or loan is late or missed, it immediately impacts your credit score. It tells your lender that you are unable or struggling to make payment.

Late or missed payment signals a message about your financial stability. So never miss a credit card or loan payment. Set up a direct debit to avoid being late. Usually, when you take out a loan, you are asked to set up a direct debit, do not decline.

If you plan to renegotiate your loan and are required to set up a direct debit, please do that. For your credit card, set up a minimum payment on a direct debit to avoid missing a payment.

If you find yourself more fluid as the months go on, you can top up on your credit card.

Missed or late payment, bankruptcy judgment, or tax liens are negative spots on your credit rating or report. They stay on it for up to 6 to 10 years which is bad for your credit report. 

Your credit report is a report that shows your credit history. It shows your loans, missed loans, missed payments, late payments, and a full picture of your credit footprint. This report carries a rating tied to you.

2. Multiple or Frequent Applications

If you make a lot of credit applications around the same period, they will reflect on your credit report. Each consecutive application impacts your score and makes hard checks on your credit. 

You can explore credit applications that make soft checks. There are also research websites that tell if you qualify for a credit card before applying. These websites do soft checks that would not reflect on your credit report. 

If a website says you have a 70% chance of not getting credit, do not proceed with such an application. If you apply and do not get a credit card, there will be a footprint on your credit report that can impact your score.

Even if you apply again after a few weeks or months, it can still drop your credit score. The more declined applications you have, the lower your score drops. Multiple applications tell the credit system that you are desperate for credit that you cannot afford.

3. Financial Links

Having property or joint accounts with a spouse or partner can link you with them financially. If this partner has poor credit, declares bankruptcy, or has poor money habits like late or missing payments, it will indirectly affect your credit score. 

It is either you tell your partner to improve their habit or separate your financial links with them.

If you are no longer in a relationship with someone or you no longer have a reason to be linked with them, take active steps to separate yourself from their financial credit. Close the joint accounts, and have separate bank accounts.

4. Uncorrected Errors on Your Credit Report

If there is an error on your credit report, report it as soon as possible. Such errors may include having a timely payment recorded as late or an un-missed payment recorded as missed.

If something happened to your card that impacted your credit rating, take steps to correct those errors. Call the credit rating body to correct that error and ensure that the correction reflects on your credit report.

Once the error is corrected and reflected, your credit score will automatically increase.

5. Withdrawing Cash From Your Credit Card

There is a video on my YouTube channel where I talked about credit card mistakes to avoid. One of those mistakes I mentioned is withdrawing cash from your credit card; this is a no-no! A never-never!

You should never withdraw money from your credit card; it portrays you have poor financial habits. Doing this may mean you are desperate for money or so broke that you are withdrawing cash from your credit card. 

A cash withdrawal always has a higher interest rate on the credit card. Also, the cash you take out of your credit card will be the last one to be paid off. 

It is a wrong move that will be reflected on your credit report and impact your credit score negatively.

6. Not Being On the Electoral Roll/Voters Register

If you stay in the UK and are not on the voters’ register, your credit score will be low. But once you get on the voters’ register, your credit score will actively increase.

If you are not registered, I advise that you do that now. You don’t have to be a British citizen to be on the voters’ registers.

Registering to vote will help you get good credit in the future and push up your credit rating.

7. Canceling a Credit Card

If you have paid off one of your credit card debts and decide to close it down, it will impact your credit score negatively.

When you have 20000 worth of credit and used 10000 pounds out of it, your credit utilization rate is 50%. This means you have used 50% of the credit available to you.  

Cancelling a card with an unused 10000 pounds will increase your utilization rate even though you paid it off completely. That will impact your credit score.

When you pay off a card, don’t bother canceling it because leaving it uncancelled drops your utilization rate.

A low utilization rate signals to any financial organization that you have credit that you are not using. It shows you are financially stable and disciplined and can be trusted with money.

8. Identity Theft

Your credit score may get impacted negatively if somebody has stolen your identity and used your credit terribly without paying it back. 

You will end up missing the so-called payment on a credit you did not spend, thereby impacting your credit score.

Once this happens to you, ensure to inform your bank and have the debt taken off your credit report. 

I always suggest that you check your credit report regularly. I use the ClearScore app to check my credit report monthly; it tells you how you are doing credit-wise.

Checking your credit report every month is a great way to know when somebody is using your credit.

Improving your credit score may not happen overnight, but properly managing your money can make a big difference.

I hope you find these 8 tips useful as you embark on the journey to improve your credit score.

Till next time.

Love,

Ronke O.

Published by ronkeodewumi

I am a Chartered Accountant (ACMA, CGMA) and seasoned Management Consultant with about 16 years of experience driving the delivery of strategic solutions to complex problems of global firms. Through my blog, youtube channel, social media, tailored courses and downloadable material, I share information, resources and tips to help you manage your money better, grow your business, progress in your career, thrive in difficult times and create a life that is safe from failure, while being the best version of yourself. You will also find here links to my youtube videos where I share more nuggets to help you achieve and live your dream life. I am based in London, United Kingdom and always happy to connect with you via email (ronkeodewumi@gmail.com), social media or my contact page here.

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