Maintaining a good credit score has a number of benefits, such as lower interest rates when you apply for a loan or a new credit card. And if you’re thinking of applying for a mortgage, a good credit score can open up more opportunities.
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If you’re lucky enough to already have a good score, there are things you can do to maintain it.
What constitutes a good credit score?
Good credit scores vary among credit reference agencies (CRAs) and it can sometimes be confusing to know where you stand, according to Barclaycard. At Experian, the largest credit report agency in the UK, a score of 881-960 is considered a good credit score.
TransUnion considers a good credit score anything between 604-627 and Equifax expects a score of 420-465 for borrowers to be in the ‘good credit score’ category.
It’s important to remember that these agencies have their own scales and criteria. If you have a good credit score with one of them, you’re likely to have a good score with the other two as well.
When in doubt, it’s best to check all three agencies to see whether your score is good everywhere. But if you just want to perform a quick financial check, Experian might be enough, as it’s the largest CRA and the one most frequently used by lenders.
How do you maintain a good credit score?
There are several ways you can maintain a good credit score. Let’s take a look at five steps you can take.
1. Monitor your credit report regularly
If you see your score drop suddenly, take a closer look. Maybe you forgot to pay a bill or maybe there are signs of fraud, such as new lines of credit you don’t recognise. Always contact the CRAs if you notice an error to see how you can fix it.
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2. Pay your bills on time
Payment history has a significant impact on your credit score. Even a couple of missing or late payments here or there can damage a good credit score. To make sure you don’t miss payments, try automating your bills. You can also simplify your bills by cancelling subscriptions for things you no longer need or use.
3. Check your credit utilisation rate
Credit utilisation is the relationship between how much credit you have available (the limit on your credit cards, for example) and how much of it you’re using.
To keep a good credit score, you should ideally use no more than 25% to 30% of your limit at any time. So if you have a £1,000 credit card limit, try to maintain a maximum balance of £250 to £300.
If you do use more, aim to pay off your card in full at the end of the month.
4. Slow down with credit applications
Every time you apply for a new loan or credit card, this triggers a credit inquiry. While checking your own credit report won’t affect your score, inquiries by lenders can have a negative impact. Apply for several lines of credit within a short period of time and the effect can be even worse.
The takeaway? Don’t apply for credit unless you really need it. And if you’re rejected, look into why rather than immediately applying to another lender.
5. Keep your information up to date on the electoral register
Lenders access the electoral register to confirm your information, including your name and address. If you move but don’t update your address on the register, things won’t add up. This could hurt a good credit score and even lower your chances of getting a loan approved.
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