Three ways to boost your credit score

Credit scoring can be a complex business. But this three-digit be the difference between getting accepted or declined for a loan.

Here are three ways to boost your credit score:

1. Paying everything on time

At a credit reference agency, an account status of ‘0’ shows an up-to-date credit account. This shows that you are paying your commitments on time. There are no arrears.

However, when you miss a payment that status will change to ‘1’. This means you are one payment in arrears. Most lenders provide a ‘grace period’ of 14 days before reporting arrears. If your account status goes from ‘0’ to ‘1’ your credit score will fall. If you miss more payments your credit score will fall further.

Missing six payments in a row will not only affect your credit score it will also make it more likely that a lender will reject your loan application outright. This is because once you’ve missed this many payments you are often considered in default.

2. Using just a small proportion of credit card or overdraft limits

Credit scores can increase if credit is available but unused. This suggests to lenders that a borrower uses such facilities to manage peaks in expenditure, rather than spending on items that they cannot really afford.

If you have access to a credit card, try and keep the balance below 50% of the limit.

3. Having lots of older accounts

Lots of up-to-date accounts will help your credit score. If you are managing multiple commitments with payments on different days this shows organisational capability, commitment and ability to repay.

If these accounts have been open for a long-time, that’s even better. It’s a sign of stability and a sign that you’ve kept up to date with payments over a number of years.

We hope that these three ways to boost your credit score are useful.