Having a good credit rating opens the door to many opportunities in life, from borrowing money to purchase your first home, to spreading the cost of a new car and more. It also means that you’ll have access to the best rates and a wider choice of options. However, not everyone can claim to have an excellent credit score, especially if you have no credit history to show. Building and maintaining a good credit score is important, so here are some tips on how to stay on top of your credit rating and keep it from dropping.

Avoid Multiple Applications for Credit

Each time you apply for credit, your credit history will be checked by the lender and a hard search performed. This is where your credit report is fully accessed by a lender and used to determine your suitability for a loan. However, this will leave a trace on your credit file and reduce your score slightly, so if you apply for multiple lenders in a short space of time, this will negatively impact your credit rating. To avoid this, choose specific lenders to help you with your circumstances. If you have poor credit already and you need emergency cash, for example, it’s best to use payday loans bad credit lenders who specialise in helping those with a low credit rating. It’s also a good idea to use lenders or brokers who can pre-approve your application, as this way you can see if your eligible without the need for a hard search of your credit file.

Maintain Financial Commitments

If you have multiple bills to pay, staying on top of them is paramount to ensure no negative impact on your credit rating. Even if you miss one repayment on your mortgage, loan, credit card etc, this will show on your credit file and reduce your score. If you get into the habit of regularly not paying on time, you run the risk of defaulting a credit agreement which other lenders will see. Set reminders for when payments are due and ensure you have enough available credit to cover them. Setting up direct debits ensures the payments leave on time, so you won’t have to manually remember to pay. Maintaining repayments will ensure you keep your credit score steady and once the debt is repaid, will eventually improve your score.

Don’t Use All Your Available Credit

The more available credit you have, the better your credit rating will be, so maxing out your limits is not the best idea when improving your credit rating. Credit Reference Agencies (CRAs) will look at your credit utilization, the percentage of your available credit that is used. If you have products such as an overdraft or a credit card, these will have credit limits agreed. The more of your credit limit used, the higher your credit utilization will be. The reason you need to have low credit utilization is because this will show CRAs and lenders you are not dependent on credit and you are controlling your finances. High credit utilization can be a main reason for low credit scores, so if you have products that are currently well over 30% utilization, it’s a good idea to focus on reducing them as much as possible.

Keeping your credit rating steady and as high as possible will enable you to achieve your financial goals and live with fewer credit restrictions. By avoiding the common issues listed above, or working towards improving them, you will eventually see your credit rating improve for the better.

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