Let’s Score

There are times when you find yourself in a pinch and in need of a loan. Other times, an opportunity presents itself that requires money you don’t have lying around. Then, you may want to take a mortgage.

I moved to the UK in 2013. This was the first time I realised some countries had rating systems for their residents. The US does it, and so does the UK.

The rating, also known as a Credit Score, measures how credit worthy you are. The higher your score, the more likely you are to get a loan. You are also more likely to be approved when renting a new flat, for example.

Intuitively, I thought the more money I had, the higher my score would be. I was wrong. In fact, there is no mention of your balance at all in your credit score.

So what DOES affect your credit score? It turns out there are quite a few easy ways to improve your score.

1. Register to vote. This is the easiest one. Make sure you register to vote. Yes, that affects your score. The longer you are registered in one address, the better.
2. Hold credit cards. This one is straightforward but not always as easy. The details are a bit obscure, but I believe any credit cards will do, so long as you use them and pay the full amount on time consistently. The more you have – the better. Aim for credit of at least £15,000.
3. Always pay your bills on time. Never, and I mean never, miss a payment. Always pay your credit cards in full on time. It’s easier to do if you set up a direct debit.
4. Stick to one provider. This one takes some time. You only have to choose one provider. I found it easier to stick to my mobile provider. Do that for 6 years for the optimal score. You can continue switching your other service providers.
5. Keep your spend low. How low? 1% to 25% of your credit limit is ideal. You can do this by either spending less or having more credit. This is measured per card.
6. Consolidate your credit checks. This has a short term impact on your score, so you don’t want it spread over a long period of time. This includes opening bank accounts, applying for loans and applying for credit cards.

A few words about credit cards. I keep my credit cards active by spreading my subscriptions between them. This way I don’t have to worry about them not being utilised. Every once in a while, I see if I can raise my credit limit on my cards. This is easier than applying for a new card.

There are a few other things to keep in mind: your spouse’s rating also affects your score. Having a mortgage is also constructive for your score.

I try to always keep my score as high as I can. I never know when I’ll need a loan or to pass a credit check. Banks are happier to give you better loan terms if your score is high, too.

Oh, one last thing. You can keep track of your score on a few websites. Some are free. Check out Credit Karma and Experian. I felt the latter was a bit spammy, but I’m sure some won’t mind.

I hope this helps you keep your score high, too.