00:00If you're wondering how you can improve your credit score then stay tuned. I'm going to talk
00:04about seven ways you can try to improve your score and how this can help you get the best deals for
00:09credit cards, personal loans and mortgages. If you're new to this channel I'm Matt. I've been
00:14a finance consultant for over 10 years working for one of the top consulting companies in London.
00:20I now run my own company and on this channel I talk all things personal finance. So let's start
00:25by explaining what a credit score is. A credit score is a sign of how healthy your credit report
00:30is and lenders will use this to check whether you're a reliable borrower. It can impact whether
00:35you get accepted for loans, credit cards or mortgages. One of the main credit report providers
00:41is Experian and they show credit scores in the following categories ranging from 300 to 850.
00:48A credit score of 670 or above is generally considered good and a score of 800 and above
00:54is considered to be exceptional. Most consumers have a credit score that falls between 600 and 750
01:00and last year the average FICO credit score in the US was 715. Achieving a good credit score can help
01:07you qualify for a credit card or loan with a lower interest rate and better terms. So why is having
01:13a good credit score important? According to Experian most lenders require a minimum credit score of 620
01:19to buy a house with a conventional mortgage. Your credit score plays a role in determining the interest
01:25rate and payment terms on a loan and lenders will base the interest rate they charge on how risky they
01:32view you as a borrower. So while it may be possible to get a mortgage with a bad credit score you're
01:38typically better off improving your score before applying for a mortgage to qualify for good terms.
01:43For example the difference between taking out a 30 year fixed rate $250,000 mortgage with a 620 FICO
01:51score versus a 670 FICO score could be over $160 per month. That's extra money that you could be putting
01:59towards your savings or investments and over the lifetime of the loan having the better score could
02:05save you over $57,000 in interest payments. So what influences your credit score and how can you improve
02:12this? FICO uses percentages to represent generally how important each category is and considers scoring
02:20factors in the following order. Your payment history is 35%, the amount you owe is 30%, the length of your
02:28credit history is 15%, the mix of your credit is 10% and any new credit you have is also 10%. Although the exact
02:38percentage breakdown of your credit score will depend on your unique credit report these percentages can
02:44give helpful guidance and based on this I've got seven ways you can improve your credit score. Firstly
02:51make sure you pay your bills on time. If you have a deadline to make a payment by make sure you hit it
02:57as it shows on your records and demonstrates to lenders that you're able to make a payment when you're
03:02supposed to. Missing payments, having account sent to collections or filing bankruptcy could hurt your
03:08scores and having a late payment history stays on your record for a number of years. So a couple of
03:14tips to help you with this. Set up direct debits for a few days after payday so you have the money in
03:20your bank account ready for any direct debits being taken out for regular monthly bills. And if you do have
03:26any late payments speak to your lender or provider and agree the plan to settle those payments over an
03:32agreed time period so they don't show as late payments going forward. The second way to improve
03:38your credit score is reviewing your credit utilization. This is the percentage of your overall available credit
03:44that you're using. The typical guidance is to keep this at or below 20 to 30%. So if your credit limit
03:52is $2,000 per month that would mean spending no more than $400 to $600 per month on credit. Calculate
03:59this by dividing the amount you spend on credit each month by the total credit available to you.
04:05If you're unable to reduce the amount you spend on credit each month one way to improve your credit
04:11utilization score is to ask for a higher credit limit from your credit provider. Importantly you don't
04:17have to use this additional credit but it can help to reduce your percentage credit utilization. The
04:22third point to improve your credit score is to check your credit report for any inconsistencies. You
04:28can view your credit report on sites like creditkarma.com or annualcreditreport.com. Ensure your history is
04:35accurate and consistent and shows things like the correct property addresses at the correct time
04:40periods of your life and look for any mistakes or errors. This is important because lenders will use this
04:46information to cross check to any applications you make for credit and if there are discrepancies in
04:52the information this can result in your application for a loan being declined. Reviewing your credit
04:57report can also in the worst case scenario identify fraud if someone's taken out credit in your name
05:03without you knowing about it. I had this a few years ago and I worked with the credit report agencies
05:09to correct my information and remove the incorrect credit card from my details. The other thing to watch out
05:15four is linked accounts so if you've ever taken out anything with another person such as a joint
05:20account and you no longer need that account then it's important to correct this information and give
05:25a notice of disassociation as if the person you had a joint account with had a bad credit score this
05:31could also impact your credit score as well. Fourth is the length of credit history you have this
05:36includes the average age of all your credit accounts and also the age of your oldest and newest
05:42accounts showing a good history over a long period of time where the bank shows stability. This doesn't
05:48mean that you can't look for the best bank accounts or credit card providers to move to but think about
05:53having a long-term account and then another account which you use to switch to the best terms every so
05:58often that way you don't lose the record of having an account over the long term. The fifth point is your
06:04credit mix and to use a credit card responsibly. This considers whether you have both installment accounts such as
06:10a car loan a personal loan or a mortgage and also revolving accounts such as credit cards showing that you can
06:17manage both types of accounts responsibly generally helps to improve your credit score. However only do this if you can
06:24spend within your means for example using a credit card on day-to-day expenditure for food shopping or transport. This will
06:32help to build up your credit score. The sixth point is try to avoid too many hard searches and space out any credit
06:39applications where possible. Hard searches are performed when you apply for credit as the company
06:44you've applied to will check your credit report. For example, it could be an application for a mortgage, a credit card,
06:50or even a mobile phone. Too many hard searches can impact your credit score. Experian recommends one hard search
06:58every three months so try to plan out any applications you intend to make so you can spread them over a longer
07:04period and not have them all in one go. And finally, number seven, try Experian Boost to see if it can help
07:11improve your credit score. Experian Boost takes into account regular payments like your monthly utility
07:17bills, your mobile phone contract, or TV subscriptions with Netflix and it helps to show that you're able to
07:24manage your money. Not all lenders will take it into account but it's an extra step which might get you some
07:29additional points that move you into the best credit score band possible. The key is to be aware of your
07:35credit score and the things you can do to improve it, particularly before taking out a loan or line
07:40of credit so you can get the best deal possible. I hope this video has been helpful. Feel free to leave
07:45any questions in the comments and give the video a like and a subscribe and I'll see you on the next video.
