Before we think about your Credit Score… What is Credit?
Credit is the ability to borrow money or access goods or services with the understanding that you’ll pay later. Lenders, merchants and service providers (known collectively as creditors) grant credit based on their confidence that you can be trusted to pay back what you borrowed, along with any finance charges that may apply (Akin and Akin, 2021).
What Affects Your Credit Score?
Here are a few tips that could help improve your Credit Score
1. Get a Free Credit Report
Understand what is recorded in your name. Make sure you go through it in detail. If there is anything you are unsure about or feel something should not be recorded, make an enquiry with the credit bureau and rectify the issue.
2. Settle Any Negative Listings
Defaults or judgements against you drastically affect your credit scoring. It would be beneficial to settle these defaults or judgements as soon as you can and obtain proof that you have settled these accounts and rescinded these judgements.
3. Pay When Credit Is Due
If you have any credit obligations, make sure you pay on time! Missing a payment, for whatever reason, will have a negative impact. Credit is essentially trust. If the credit lenders see that you are diligent by paying on time, the more trust you will gain.
4. Be Realistic
Make sure you have a well thought out budget where you are able to pay all your obligations comfortably. Live within your means.
5. Close Accounts that Are Not in Use
We have all been there. Retailers really try to glamourise that having a clothing account is something you need. However, more times than not, you actually don’t need to open up these accounts. Whether it is clothing accounts or credit cards. Close them! Only apply for credit when it is needed.
Credit Scores, Don’t Run and Hide
When we hear the word phrase “credit scoring”, we tend to run and hide. Don’t fear it. Understand it and utilise it correctly. If you are not on top of your credit, it will become increasingly difficult to maintain and keep your head above the water. Take ownership and responsibility of your credit scoring. Understand what is on your credit report and following the step by step guidelines set by the credit bureaus to help improve your credit scoring.