It might seem like a reaaaaaaaaally boring topic, but your credit score is actually pretty handy to be aware of. Your credit score essentially tells banks and other lenders how much to trust you. If you have a poor score, they’re either refuse to lend to you, or they’ll charge you more to lend you money. And I think this sucks!
Get your own back by getting your score as good as it can be. I have a few tips in the video below!
What Is Your Credit Score?
Your credit score is an indicator of how you have been doing with your money over the past 7 YEARS. The other “top-level” indicators are net worth, liabilities and assets. If you’re not tracking these, then set yourself up a spreadsheet, or a piece of paper and a pen, and start doing it. The satisfaction is IMMENSE when you see how your net worth and credit score improves over time. There will be bumps in the road sure, but overall, you want the figure to be growing the majority of the time. 6-monthly or 12-monthly is ok, or you can do what I do and track it every month (although I may be a little obsessed).
How Do I Improve My Credit Score?
There are lots of ways, and one of things I like to do is use my credit karma app to guide me on what I could be doing more or less of to make more positive changes (see link below in recommended resources).
Who Is LOQBOX?
In my research for this topic, I came across an app called LOQBOX.
They are a company who want to help people improve their credit score WITHOUT having to open a credit card. The idea is that you save money into a savings account that to a credit scoring agency, looks like you’re paying off a debt with LOQBOX*. You keep up the payments for 12 months, and at the end, open up one of their affiliate’s regular savings accounts or an ISA to get all your savings back free of charge, OR if you just want the money back, you pay a fee of £30 to do so.
To make sure you don’t damage your score, you MUST keep up with the savings payments. If you miss one, the credit score companies think you’ve defaulted, so you end up with a dent in your score. LOQBOX give you a way out by asking you to cancel free of charge so that you don’t worsen your score. Your credit score will take a dent to begin with, because it looks like you’re taking out a loan, when we know that actually you’re just saving money. It will gradually improve as you “pay off” LOQBOX.
In fact, treating all your savings goals like a “debt” is actually a very good idea – its a way of encouraging yourself to keep saving.
Overall I think this is an interesting and useful concept. Many people don’t use credit for buying things, so never build up a score. This only becomes a problem when they then come to buy a house or other big purchase. I really hate the fact that people have to go into debt in order to build their score – it just seems topsy turvy to me!
Get on the electoral register
Even if you’re someone who doesn’t vote, being on the electoral register is highly reassuring to lenders. Being stable in one area shows lenders an indication of settled behaviour. It may not necessarily be true, but moving around from place to place is a red flag for your credit score.
This will improve your score after 18 months of being in one place, and has a maximum benefit after 6.5 years.
Control Your Debt
Make sure that you’re not maxing out all your available lines of credit – leave some left in the tank! Lenders get nervous if they see you using lots of credit, because it suggests that you’re in difficulty with your money and you will be scored lower as a result.
Limit How Many Accounts You Open At Once
If you open a store card, then get a car loan, then take on a credit care, a lender will look at this negatively. Starting new lines of credit does impact on your score, so make sure you’re not opening loads all at once. Use soft credit searches wherever possible to check if you are eligable for what you are applying for, because being turned down also impacts on your score, especially if you then try other avenues immediately.
Keeping a bank account open for more than 6 years can be highly beneficial for your score. If you’re constantly switching banks, this can be viewed negatively and can hurt your score. So aim to keep one account open for the long term (as long as it’s free of course!), even if you don’t ever use it.
Get A Mortgage
While it’s not easy to get onto the property ladder, when you do, lenders will view you more favourably. It’s not a reason to buy a house, but know that being on a mortgage helps your credit score.
Never Miss A Payment
And finally, never ever miss payments. If you do, this will impact negatively on your score. If you have a tendancy to forget, set up automatic direct debits to pay off your credit cards. If you choose to use LOQBOX and miss a payment, this will count the same as if it was a credit card payment you missed.
Your credit score is an important indication of how your money is doing. Don’t be disheartened if it is taking time to improve – as long as you are putting all those good habits into action, you’ll get there eventually, it just takes time.
I’ve been tracking my credit score for over 3 years, and it’s only JUST got to excellent (I started at fair). Be patient – it will get better as your financial situation improves.
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