Improve your credit score: 5 tips for a big impact!

Credit score is the key criteria for credit worthiness. Having a poor credit score can impair your ability to obtain credit to sustain your financial requirements. Keeping and maintaining a good credit score is absolutely vital.

There are 5 simple things you can do which, if managed well, can dramatically improve your credit score:

1) Pay on time: this is pretty much self explanatory. Always make your agreed payments on time and never default. This takes time but it is the most important aspect of your credit score as your prior payment history determines the likelihood of future default.

2) Amount of debt: the amount of debt you carry is the second most important aspect of determining your credit score. While mortgages and car loans are secured items, the balance on your credit cards and personal loans add negative weighting to your credit score. Reducing the level of debt you owe can have an immediate positive impact on your score.

3) Age of credit history: the length of time over which you have had credit pays an influential role in calculating your credit score. The longer you have kept a tidy bank account / credit card more positive points are added to your credit score. The tip here is to clear any outstandings on old bank accounts and open up a new “clean slate” bank account and run it well. Apply for a poor credit credit card and use it for small payments and keep on top of its balance repayments.

4) Do not apply for anymore credit: each time you apply for a new loan or finance, your application is logged as a credit enquiry on your credit file and the higher the number of enquiries, the higher the number of negative points on your credit score. Only apply for credit when you need it.

5) Have a mixture of accounts: Keep a balanced mixture of credit accounts across loans, credit cards and bank accounts. A large amount on any one type of account may show up as heavy reliance on a type of credit and this may have a negative effect on your score.