7 tips on how to manage your credit
Quick tips to help you grow your credit confidence.
Achieving and maintaining a good credit score is a long term venture. Though you might not be thinking about borrowing yet, most people end up getting a mortgage or a loan at some point in their lives. So, whether you need to get car finance or you’re ready to put down a deposit for a new home, make sure that your credit score and credit report are up to scratch.
1. Always pay your bills on time.
Falling behind on payments may make you seem irresponsible to the potential lenders. It shows up on your credit report and could have a negative effect on your score.
2. Use a credit card to build your credit…
Credit cards can be a great way to build your credit if you have never borrowed before. The best way to do this is to charge small amounts on the card and then repay the sum in full at the end of your credit month.
3. …and don’t be tempted to misuse it!
Some of the common mistakes when using a credit card are:
– Missing a payment, which will negatively affect your credit score.
– Making only minimum payments: it will take you a very long time to repay the debt as most of the payment goes towards the interest fee.
– Withdrawing cash: you usually have to pay a fee and as it shows up on your credit report, it makes you look like you’re not managing your finances too well.
4. Keep credit utilisation low.
Even if you pay off your credit card in full every month, using up a high percentage of your credit could make you seem like you are managing your finances poorly. Credit utilisation is one of the factors that potential lenders look at, so a good tip is to keep it below 30% of what’s available to you.
5. Regularly check your credit score and report.
Keeping an eye on your score will mean that you feel in control of your “financial CV” and you can more easily predict whether your loan or mortgage application will be accepted. Also, looking over your credit report regularly will show up any mistakes or even fraud that might be happening under your name – if you see an account that you don’t recognise, make sure to check it out.
6. Don’t take on more debt than you can manage.
This can cause a downwards spiral where you end up taking on more debt to pay off what you already owe. If you find yourself in financial trouble, you might want to talk to a debt charity or a money advice service, where you can get advice on how best to cope with your situation.
7. Avoid payday loans.
These are well known to have very high interest rates, which means that they don’t tend to be suitable as a long term solution.