There's a high chance that you have hundreds of different credit scores. The main reason for this is because your credit score is calculated via a mathematical algorithm. The site that you go through will ultimately determine which score you get, so it is normal for you to have a different one depending on the site that you use to check yours. A lot of scoring models will take into account your payment history too. If you want to improve your credit score, then here are a few top tips that will help you out.
Pay your Bills on Time
When lenders review your credit score, they are usually interested in seeing how you pay your bills and how reliable you are. This is because your past payment performance will absolutely affect how you pay off loans in the future. You can easily influence your credit score in a positive way by paying your loans on time. You also need to try and make sure that you pay off more than the minimum amount for your credit card too. If you are behind on any of your payments, then you have to make sure that you catch up as soon as possible. If you don't then this will really go against your score and it will also make it much harder for you to catch up in the future.
There's a new and free product called Experian Boost. It's an opt-in product but it gives you the chance to connect your bank account through your telecom provider. You'll need to verify your data and they will also check your payment history too. When you do this you will be able to help yourself with your credit score and you will also be able to take advantage of a huge range of features too.
Pay off Debt
The credit utilisation ratio is super important. It's calculated by adding all of your credit cards together and it also divides that by your total credit limit. For example, if you have around £2,000 on your credit cards right now and your total limit is £10,000, your current utilisation will be around 20%. If you want to figure out your limit then you need to look at all of your statements from the past year. You then need to try and add the balances together and then divide it by 12. This is how much credit you tend to use over 12 months. If you have a high limit then this could be going against you, so make sure that you take your time and also make sure that you make the effort to avoid using your card unnecessarily. If you become an authorised user on another person's account, then this can help you too.
Only Apply for New Credit when you Really Need It
You should never open accounts just so that you can have a better mix of credit. If you do then you will have way too many hard inquiries on your account and you will also find it way easier to overspend too. You also need to try and make the effort to only apply for credit if you well and truly need it.
Don't Close your Unused Accounts Down
You should always make the effort to keep any unused accounts open as long as you can. This is a smart strategy because it can help you to boost your credit utilisation ratio. Every time you close down an account, you risk lowering your credit score and this is the last thing that you need when you are already putting a lot of effort into maintaining the score that you have.
Don't Apply for too Much New Credit
Opening a new credit card can increase your limit overall which is great. If you apply for too many new cards however then this can give a hard enquiry on your credit report. One way for you to get around this would be for you to try and apply for one credit card every few months. When you have been accepted, try and hold off applying for another for quite some time. If you do, then this will really help you in the future and it will also make it easier for you to maintain your score.
You should always check your credit report with three different bureaus. The ones that you should be using include Experian, Equifax and TransUnion. If you have information that is not correct, then this will go against you. If you want to help yourself here, then you need to verify the accounts that you have listed on your report. If you do see any errors, then you have to tell the provider as soon as you can so you can try and get that sorted out.
Rebuilding a Credit Score
If you have any negative information on your reports, such as late payments or anything else of the sort then time is your ally. You have to be patient and you also need to make sure that you don't apply for anything else in the meantime. There isn't a set rule when it comes to rebuilding your credit score, and there's no time limit either. A lot of it comes down to what caused your score to drop, whether it was delinquency or even debt collection. Usually, these will affect your score until a certain amount of time has passed, but normally, this information is not disclosed as it depends on the provider, the amount that was claimed and a ton of other different factors. As a general guideline, delinquencies can remain on your report for up to 7 years, and bankruptcies remain on there for 10. Inquiries made on your report last for 2 years.
At the end of the day, rebuilding your credit score will take time and there really are no shortcuts either. If you want to help yourself then you need to check the data that is affecting your score and you also need to see if there are any discrepancies.
Building your Credit Score
Sometimes you won't have a good credit score because you don't have a lot of experience with credit. You may also have a thin credit file. This means that you don't have more than four pieces of information on your file. When this happens, a bank or lender won't be able to find out if you're a good candidate for a loan or not purely because they don't have the right information. There are a few things that you can do to fatten up the file that you have now. You could apply for a secured credit card or you might even want to try and take out a credit builder loan. This is super easy to do, and you would be surprised at how much it could benefit you overall.
How Change Affects your Score
One question that a lot of people ask is how change affects a score. For example, if you close down two of your poorly rated accounts, will this improve your score? In order to answer this question, you first need to understand that credit scores are based on the information that is in your credit report. If you change anything on here, then there's a high chance that your score will be affected. If you close down two of your accounts, like the above example then this will decrease the amount of credit you have. This will give you a higher utilisation rate and it will also affect your balance-limit ratio. This is what usually results in having a low score.
Using the above example, it is very easy to see how one change can really affect a lot of different items on a credit score. It's nearly impossible to completely obtain an accurate estimate of how one action is going to impact your score.
What you Need to Know
Credit scoring usually involves a very complex calculation. The more you know about how credit scores work, the more you will be able to take control of your own credit. In addition to this, you also need to take into account the important factors too. Negative information on your credit report can ultimately lower your credit score. This information remains on your credit report for a set period of time. For example, late payments will appear on your account for 7 years after you miss a payment. If you pay a debt collection fee then this doesn't mean that it will be removed immediately but it does mean that eventually your score will be improved. Bankruptcies, as mentioned above, can remain on your account for up to 10 years but this does depend on the type of bankruptcy that you face. Sure, when you pay this off, it will benefit your account but at the end of the day, it might not happen instantly, you might need to wait until your new score comes through.