If you have credit cards or overdrafts and are generally paying off the balances, well done!
But … there’s much more you can do to boost your credit score and chances of getting the best possible rates on loans.
Tip: Keep an account open. Using a credit account shows lenders if you can afford to repay a loan. Also, good credit card behaviour helps improve your credit score. Likewise, a track record of borrowing and successfully repaying, for example, a credit card is worth keeping. Because of this, be careful when closing accounts.
You might be tempted to spring clean your finances and close older accounts. Surprisingly, this can have a negative impact on your credit score. It reduces the number of ‘reference points’ a lender sees when considering your application for a loan. If these ‘reference points’ are worth keeping (e.g. a credit card with a zero balance) don’t close the account.
Tip: Keep your credit cards unused but open. Keeping open an unused credit card helps with your credit ‘utilisation limits’. These are the proportion of credit card limits you are using. For example, a credit card with a £1,000 balance and a £10,000 limit represents a utilisation limit of 10%.
Top tip: higher limits and lower the balances really help your credit score.