Borrowing tips from Knowsley Mutual

You’re more likely to be accepted for a loan if you have a higher credit score. Here are five ways to improve your credit score:

1. Get on the electoral register

It is a criminal offence not to register to vote. But rolling registration has made this harder. Voters must register each year. If you don’t, you will drop off the register.

The electoral register is reported to all the credit bureau, even if the voter has opted out of the public register. It is used to help prove identity and it shows stability in residency.

Lenders may automatically reject your application if you’re not on the electoral register.

Luckily it is easy to sign up.

2. Paying everything on time

At a credit reference agency, an account status of ‘0’ shows an up to date credit account. This shows that you are paying your commitments on time. There are no arrears.

However when you miss a payment that status will change to ‘1’. This means you are one payment in arrears. Most lenders provide a ‘grace period’ of 14 days before reporting arrears. If your account status goes from ‘0’ to ‘1’ your credit score will fall. If you miss more payments your credit score will fall further.

Missing three payments in a row will not only affect your credit score it will also make it more likely that a lender will reject your loan application outright.

Note: mobile phone contracts often report to a credit reference agency. Missing payments on these can affect your credit score.

3. Using just a small proportion of credit card or overdraft limits

Credit scores can increase if credit is available but unused. This suggests to lenders that a borrower uses such facilities to manage peaks in expenditure, rather than spending on items that they cannot really afford.

If you have access to a credit card try and keep the balance below 50% of the limit. Even lower. Even better.

4. Having lots of accounts

Lots of up to date accounts will help your credit score. If you are managing multiple commitments with payments on different days this shows organisational capability, commitment and ability to repay.

But if credit card balances are gradually increasing, this could be a sign that the borrower is using credit to make ends meet.

5. Don’t move home

Lenders like stability. Knowing someone is staying where they live means it is easier to maintain contact with a debtor. The likelihood of them running away is relatively small.

If you do need to move home, contact all of your creditors and tell them your new address. As a result your credit file will show consistency in your address history which means you’re more likely to be accepted for a loan.