5 smart ways to raise your credit scores

Most of us have heard of credit scoring; however, not many people know how important it is and how it can affect our financial life. A credit score is used to determine whether you are a reliable person for giving a loan, mortgage or credit card. The credit score depends on how well you handle your finances. If you pay your bills on time, then you get a higher score. These are some ways to improve your credit scores.

Have a credit history

You will have a low credit score if you don’t have any credit history. In such case, your loan application may be declined. If you don’t have a credit history, it shows that you are not able to pay off debt. So, lenders have a greater risk of giving you a loan.

Keep less debt

You may need to use different credit facilities every month to show that you can pay off your debts. At the same time, you should ensure that your debt is in control and doesn’t get too big. You should never use more than three-quarters of your credit cards and overdrafts limit. It is best to pay off your dues completely by the end of every month.

Don’t apply for too many credits

Some lenders conduct a ‘soft search’ during credit assessment. But there are lenders who conduct a ‘hard search’ when assessing you. During a ‘soft search’ there won’t be any trace on your credit record, but on a ‘hard search,’ your credit score may be affected. If you apply for too many loans, it might put the lenders off. So, it is best to check out the website of companies to find out how they assess their loan applicants, that is, whether they use ‘soft search’ or ‘hard search.’

Review credit file

You should request a report from credit reference agencies that will have all your credit repayment data from the past six years. Sometimes, the records may not be correct; for example, late payments may be reported incorrectly. You can do the necessary amendments so that your credit score improves.

Focus on doing the small things right

You should register yourself on the electoral roll, avoid moving house too much, avoid payday lenders, keep yourself away from gambling, etc. These little steps can improve your credit scores.

With a little preparation, attention and discipline, you will be able to improve your credit score easily. So, next time you apply for a loan, your chances of getting it approved will be higher.