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How can I improve my credit score?

Your credit score will be a significant part of any finance application; whether for a car lease, a mortgage or any other loan.

It is important to check your credit history regularly in order to check for and rectify any errors. Also to ensure you do not cause any further damage by applying for finance that you are sure to be declined for.

There are many ways to improve your credit score before applying for finance on your lease vehicle, some of which we outline below:

Register to vote

Registering on the electoral roll at your current address is integral to linking you to your address. When you register to vote your electoral details are registered on your credit report. This makes it easy for lenders to confirm your name and address and your credit score will increase as a result. It will also vastly improve the time taken to be approved for any finance application you make. Without it, you may be asked for additional forms of identity and proof of address.

Build your credit history

As a credit score is a way of facilitating lenders predicting your financial reliability based on past behaviour, a lack or minimal credit history will still cause issues. Without this information available to be able to assess you your credit score will be lower to reflect the uncertainty. This is therefore a problem common among younger people and those who are new to the country.

It is therefore important to build up your credit history by having a bank account, having and paying off a credit card on time and managing household bills well. Most important is paying any owed funds regularly and on time.

Pay debt reliably

As explained above, it is a good idea to have some debt if you are looking to improve your credit score as this informs lenders on your reliability for future lending. However, you must always pay this debt off on time as required in order to keep your credit rating healthy. It is older, well-manged accounts that will best improve your credit score.

Keep credit utilisation low

Credit utilisation refers to the percentage of your credit limit currently in use. For example, if your credit limit is £500 and you are already borrowing £250, your credit utilisation is 50%. If your percentage is lower this will reflect positively in your credit score. Below 25% is the utilisation percentage to aim for where possible.

This must be carefully managed against having a reasonable credit limit. Taking out lots of credit cards could reduce your credit utilisation but could also indicate that you are falsely reliant on borrowing. Each new account also increases your vulnerability to fraud and identity theft.

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