Against the backdrop of economic uncertainty from COVID-19, getting your credit score in tip-top condition has become more important than ever. Managing your credit history and boosting your credit score is an opportunity for you to demonstrate to a potential lender that you’re financially responsible. Your credit score has also started to play a role in your employment, mobile phone contract, insurance and bank accounts.
If you have a low credit score and a limited history, you are at risk of higher interest rates when you apply for credit cards and loans. It may even impact your ability to borrow money in the first place as the lender needs evidence that you have a proven track record of managing your finances sensibly and making repayments on time. That’s not the case with Salad Money, however. We offer key workers fair and affordable loans using data collected from Open Banking, rather than using your credit score.
A high credit score means traditional lenders will consider you low risk and therefore you’re more likely to be approved for credit. This can positively impact your future where freedom over your finances is concerned.
Here’s what you need to know about your credit score and how to achieve some quick wins when it comes to its improvement.
What affects your credit score?
There are a number of different factors that can affect the algorithm that calculates your credit score. These include whether or not you’ve ever missed a payment, the length of your credit history and how much new credit you have. Your payment history is the most important factor in credit scoring and even one missed payment can have a negative impact on your score. When a lender considers your application, they want to be sure you’ll pay back your debt on time.
How long does it take to improve your credit score?
Your credit history is built up slowly over time. Unfortunately, there is no definitive answer when it comes to considering how long it can take to improve if your score is low. Your credit score is a sensitive number that can move up or down on any given day depending on how the information in your credit report changes. There are, however, some improvements that you can make straight away if you want to see the results of your efforts as quickly as possible.
Ways to improve your credit score quickly
Register on the electoral roll
Getting on the electoral register can improve your credit score and boost your chances of getting accepted for credit. This is due to the fact that credit reference agencies can see that you are who you say you are and you live where you say you live.
Check for mistakes on your file
Your credit score is based on the information held in your credit report. If this information is incorrect, then your credit score will be too. You should regularly check your credit report for any inaccurate data, such as the wrong address. There should be no discrepancies between information on your credit file and the details given on your credit application, as this will be a red flag to potential lenders and could mean that your score is lower than it should be.
Pay your bills on time
This may seem like a given, but paying your bills on time is crucial if you want to maintain a good credit rating. Forgetting to pay your bills can cause serious damage to your credit score as it suggests to lenders that you struggle to manage your finances. If that’s the case, why should they lend you money?
It is a good idea to set up direct debits to pay your monthly utility bills, phone and credit card payments and if you miss a payment call the creditor immediately. Although one single late payment might not have a huge impact on your score, several late payments will.
Keep an eye out for fraudsters
Fraud and identity theft is becoming an increasingly big problem, which is another good reason to check your credit reports regularly. Keeping a close eye on your report will help you spot financial fraud quickly and take the appropriate action.
If you see an increase in the amount you own or any applications that you didn’t make, get in touch with your creditor immediately. Your lenders should resolve any damage to your score quickly if you fall victim to fraud. If the problem is left unaddressed, you will be liable for whatever debt the fraudster accumulates on your account.
Pay off any outstanding debt
Unfortunately you can’t wipe out any past mistakes you have made on your credit report, but you can do some damage control and ideally pay off anything that is outstanding.
Open Banking vs. credit scoring
2020 has seen the highest surge in people using Open Banking in the UK, which does not come as a surprise considering its benefits. Firstly, Open Banking can make the process of getting a loan quicker and easier as it checks whether you’re worthy of credit in a matter of minutes. Rather than relying on your credit history, it simply assesses your current financial situation.
At Salad Money, we use Open Banking to be able to provide small, affordable loans to key workers. This is because we recognise the challenges involved in accessing financial support as someone who has a unique mixture of income streams. We believe that their ability to access loans should not be solely based on their credit history, but their financial situation at present.
Contact us today to find out more about our fair lending practices - and no need to worry about your credit score!