Maintaining a healthy credit score can often feel like a complicated task. With different scoring systems used by various companies and lenders, it’s easy to become frustrated. However, the key to a healthy credit score lies in monitoring and managing the factors that can affect it. By keeping these factors in check, you can ensure that your credit score remains in good standing.
A credit score is a numerical representation of your credit history, which includes your past borrowing, missed payments or defaults, credit utilization, and more. While lenders may not have access to the detailed report, they rely on baseline scores to determine your creditworthiness. Therefore, it is crucial to address the individual factors in your report to meet their requirements.
Although credit scoring companies may use different scoring systems, they all consider similar factors. By focusing on these factors, you can maintain a good credit score, regardless of the specific number assigned to you.
Factors That Influence Your Credit Score
Missing or late payments: Any missed payment on your debts will be recorded on your credit report, and multiple missed payments will have a more significant negative impact. To maintain a good credit score, it’s essential to stay on top of your payments and avoid defaults.
Public records: When lenders are unable to recover money owed, they may file for a County Court Judgement (CCJ), leading to a public record and a mark on your credit report. Bankruptcy or having an Individual Voluntary Arrangement (IVA) also leave lasting impacts on your credit report, remaining there for six years.
Electoral roll registration: Stability and trustworthiness are crucial factors for lenders. Being on the electoral roll at the same address for a significant period signals stability, making you appear less risky compared to those with frequent address changes or no fixed address on the electoral roll.
Credit utilization: Lenders assess your ability to repay credit by looking at how much of your credit limit you are using. Utilizing your credit limit to the maximum may raise concerns and increase perceived risk. Maintaining lower balances demonstrates responsible credit management.
Age of credit accounts: The length of time you have been using credit and the age of each credit account affect your credit score. Sensible credit usage over a long period can boost your score, while opening new accounts reduces the average age of accounts, potentially lowering your score.
Errors on your credit report: Regularly checking your credit report across major credit scoring companies (TransUnion, Equifax, and Experian) ensures that your personal information is accurate. Look for unfamiliar entries and immediately dispute any errors you find.
Lack of credit history: A credit score can only exist if you have a credit history. If you are just starting out, consider taking small amounts of credit with 0% APR offers or applying for credit builder credit cards. Remember to pay in full each month to establish a positive credit history.
Rebuilding Your Credit Score
Whether you are rebuilding a poor credit score or starting from scratch, it is possible to achieve a good credit score with perseverance. Use the aforementioned points as a guide to get back on track, and remember that improving your credit score takes time.
If you are rebuilding credit after completing a debt solution or paying off debt, obtaining credit may be challenging initially. However, don’t lose hope. There are specialist secured loans and credit-builder cards available to help you. When utilizing such options, borrow small amounts and ensure you pay in full each month to avoid high interest charges and to make sure you don’t get back into the debt spiral again. Additionally, some prepaid credit cards offer credit-building features within a specific timeframe, providing a safe and interest-free way to rebuild your credit.
In 2023, understanding and managing your credit score is crucial for financial stability. By actively monitoring your credit score and taking steps to address the factors that influence it, you can maintain a healthy credit profile and enjoy the benefits that come with it. Remember, building and rebuilding credit is a gradual process, so stay persistent and make wise financial choices to pave the way for a brighter financial future.
At Debt Movement we provide professional debt guidance and solutions that help you move out of debt. We offer non-judgemental financial guidance to relieve the burden of financial strain and offer support on your journey to financial freedom. Request a free call back today.
