Building a good credit score is not always as easy as you think it is. If you have no debts or credit cards your credit score is probably not that good. It is not just those who owe money and default on payments. Which is why I am going to talk about how to build a good credit score.
How To Build A Good Credit Score
What is a credit score?
A credit score is a 3 digit number that defines your personal credit score and how likely you are to be accepted for credit. This is determined by your personal credit report and how you have handled credit in the past.
This will include credit cards, store cards, personal loans, utility bills, mortgages, phone contracts. So basically anything that you make a monthly payment for.
- 300-579 – Very poor
- 580 -669 – Fair
- 670-739 – Good
- 740-799 – Very Good
- 800-850 – Exceptional
You can check your credit score through various companies like Experian
Why is my credit score low?
It will be no surprise to you to find your credit score is low if you have defaulted on payments or are always late paying your bills. But what if you always pay your bills on time, your mortgage is always paid on time and credit card is cleared every month.
You would think that your credit score would be exceptional, and surprised that it is quite low. But why is this? Your credit report is updated every month and if you have no debt information, although on paper your score should be high there is no evidence of any credit history.
How can I increase my credit score?
Pay your bills on time
When lenders review your credit report and request a credit score for you, they are looking to see how reliable you are in paying your bills, as this will give them an insite into how reliable you will be in repaying in the future. Paying your bills late or an amount for less than was originally agreed to pay can negatively affect your credit score.
Pay off debt and keep credit card balances low
Keeping your credit card balance low, will show lenders that you are responsible with credit and do not max out your credit cards each month.
Only apply for credit when needed
Only apply for credit when needed, for example if you are looking for a personal loan through cashlady, sunny or peachy, only apply as and when you need to. Applying to numerous companies will have a negative effect on your credit score. As each time you make an application that is registered on your credit file.
Do not close unused credit cards
If you have a credit card you no longer use or have just cleared the balance. Do not close it down even if you have no plans to use it (as long as it does not cost you an annual fee).
Always remember your credit score is personal to you. Always think carefully before taking out any credit or joint credit with someone else as this can affect your score.