The new year is more than the start of another calendar year. It’s a chance to start from scratch, make changes and improve our lives. Along with resolutions like getting fitter and eating healthier, many of us will be focusing on improving our finances.
What better place to start than with one of the most important measurements in your financial life: your credit score?
If you’ve taken a New Years resolution to improve your credit score, the experts at the auto finance company Zuto have 10 tips to help you do just that.
Why try to improve your credit score?
Your credit score is a key indicator of your financial health. It shows how reliable you are when it comes to borrowing and paying back money.
If you are planning to buy a home in 2022, a higher credit score could help you not only qualify for a mortgage, but also access an affordable interest rate. Likewise, if you need to take out a car loan, your credit score will play an important role in determining the amount of interest you will be charged.
A good credit score could also help you qualify for the best credit card deals available.
How can you improve your credit score in 2022?
The good news is that improving your credit score isn’t too difficult. Here are 10 simple and practical Zuto tips to help you boost your score in 2022.
1. Register on the electoral list
the electoral list is a list of all eligible voters in the UK. Getting on the voters list gives lenders a way to confirm your identity and address. This will help you improve your credit score.
2. Make your payments on time
Pay your utility bills and other payments owed, such as credit cards and loans, on time. It will show lenders that you are a reliable borrower and that you can handle credit responsibly.
3. Keep your credit utilization rate low
Your credit utilization rate is the percentage of your total available credit that you are currently using. Keeping your credit utilization rate below 30% is generally viewed as positive by many lenders and can help improve your credit score. So if your credit card has a credit limit of £ 1,000, try to keep your loan below £ 300.
4. Limit credit requests to a minimum
Avoid doing a lot of credit applications at once or in a short period of time, as this tricks lenders into thinking that you are desperate to access credit.
Remember that any complete application will show up as a serious check on your credit report, which could negatively affect your score.
5. Use indirect research to verify your credit eligibility
Before applying for credit, use a software search feature to assess your eligibility. While difficult searches are displayed on your credit report, indirect searches are not, so they won’t impact your credit score.
6. Use your overdraft sparingly
An overdraft will show up on your credit report as debt, so use it wisely. That doesn’t mean you should never use it. If you can stay within the agreed limit, it can demonstrate to lenders that you are a reliable borrower.
7. Cancel unused credit and store cards
While old, well-managed credit accounts can help improve your credit score, having an account that is no longer in use can have the opposite effect.
Lenders may view your application unfavorably if you have too much available credit that you are not using. So consider closing old credit accounts that you haven’t used for a long time.
8. Avoid payday loans
Payday loans can sometimes help you get out of a financial bind. But if you want your credit score to be in good shape, try to avoid them as much as possible. Their interest can be huge, which makes them very expensive. Keep in mind that every time you don’t pay off a loan on time, the amount owed increases exponentially. This can lead to even more debt.
9. Financially dissociate
If you end a relationship with someone who has bad credit, also make sure you part with them financially so that their bad credit doesn’t affect yours. This means closing joint accounts and repaying joint loans. You can also request a dissociation notice from credit reference agencies.
10. Check your credit report annually
Make a habit of checking your credit report once a year, or before any new credit application. Credit reports contain a large amount of data, and it’s quite possible that an error will appear from time to time. By reviewing your report, you can take steps to correct errors and make sure they don’t affect future credit applications.
A higher credit score could open the door to a number of exciting new financial opportunities in 2022. Put these tips into practice to improve your credit score this year.
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