Improving your credit score is an important first step in demonstrating to lenders that you maintain healthy financial habits.
While everyone’s credit history is unique, there are some common mistakes that can lower your credit score. To help you get financially fit, here’s a rundown of the six common mistakes that can hurt your credit score and how to tackle them.
1. Not registering to vote
Solution: It’s your choice to vote, but adding your name to the electoral register and keeping the information up to date helps credit companies confirm your identity. And it’s good for your credit — it helps give lenders confidence that you’ll be able to be reached at the address listed.
2. Not disputing errors on your credit report
Solution: Spend time reviewing your credit report each week, and if something doesn’t look right, investigate. Make sure to look through your reports with a fine-tooth comb, because unresolved errors could be negatively impacting your score — or worse — they can be a sign that fraud has taken place. If you’ve found any inaccurate information on your report, contact the lender directly or file a dispute directly with the credit reference agency. If the error is related to your TransUnion report you can file a dispute through your Noddle account.
3. Not making regular payments
Solution: Create a budget and set up a plan for consistent repayment of your debts. Budgeting is the first step to getting your finances under control. It helps you understand how much you can afford to put toward paying off debts in regular and manageable repayments. Even if you have a lot of debt, making the minimal repayments on time and in full each month can help to improve your credit.
Remember that late payments are recorded on your credit report and remain there for six years — even if you’ve settled the account and paid down the debt. If you need help managing debt, consider seeking help from an organisation like StepChange.
4. Little to no experience with credit
Solution: Get in the credit game. While too much debt can be bad for your credit, if you’ve never borrowed money before you’ll find you have a limited credit profile. One way to build credit is to take out a small loan or credit-builder credit card. Do your research on the options available to you and consider how much you can comfortably afford to borrow and repay before applying for a loan or card.
5. Staying financially entangled
Solution: Request a notice of disassociation to unlink your credit file from an ex-partner who may have been on a joint account with you. Joint mortgages or loans can stay on your credit report long after a relationship has ended, unless you act to get them unlinked. And while you may think it’s harmless to leave someone who is no longer connected to you on your credit report, if that person has poor credit it could impact your ability to obtain credit in the future.
6. Keeping idle accounts
Solution: Consider closing accounts that are no longer active. Unused accounts can result in fees and even increase your risk of fraud if you do not monitor them, which can hurt your credit score. But make sure not to close accounts that are better left open. Long-standing accounts with a good track record can be beneficial to demonstrate your credit history if you resume using them. What’s more, if you do decide you want to close numerous accounts, be sure to do so over a prolonged period of time, because closing down a lot of accounts at the same time could negatively impact your credit usage and score. It’s also important to monitor any accounts that remain open.
By identifying the factors that are negatively impacting your credit and taking action to resolve them, you’re not only putting yourself on track to improve your credit, you’re also demonstrating to lenders that you’re committed to improving your financial health overall.
At Mortgage Solutions Belfast we will work with you to improve your score to ensure we can get you mortgage ready.
Come and see us today!