3 Strategies to Achieve Credit Score Perfection
Do you treat your credit score as just a number? Stop now.
Your credit score is a metric that defines your value and worth of creditworthiness to lenders and agencies. Every time you apply for a loan, whether it be a home mortgage or a credit card, your credit score is examined.
Lenders in the UK offer different types of lending options, with some offering short-term loans without considering your credit scores. However, these options should only be considered in emergencies. If you have a low credit score, it’s important to work towards fixing it.
But why is a high credit score important?
A high credit score certainly gives lenders more confidence that you’re likely to pay back the money on time. In the UK, Experian, Equifax, and TransUnion are the top three credit rating agencies (CRA), with each following a different methodology for calculating credit scores. The pursuit of achieving a better score than the existing one can often make you wonder, “Is it possible to get a perfect credit score?” followed by “How do you go about achieving credit score perfection?” and “What strategies can I implement to get a perfect credit score?”
This article answers these questions and describes the strategies that can help you boost your existing credit score.
Alternatively, if you want to explore lenders who don’t consider low credit scores, find out more here.
More About Credit Scores
Different CRAs in the UK have different numerical scale ranges to rate borrowers’ creditworthiness. Experian is the largest CRA in the UK, whose score ranges from 0 to 999. Equifax rates between 0 to 700 while TransUnion scores range from 0 to 710.
All three CRAs divide credit scores into five main categories: very poor, poor, fair, good and excellent. The higher you rank on the scale, the better it is. Most borrowers in the UK have their scores falling in the fair range.
Can You Achieve a Perfect Credit Score?
Getting a perfect credit score seems like achieving the impossible, and it is. A perfect score, although extremely rare, is quite difficult to achieve.
Why?
An absolutely perfect credit score is unattainable because of two main reasons: varying scoring models of CRAs and evolving credit rating factors.
Although high scores on the credit rating scale translate to lower risks, it doesn’t mean you need to have a perfect score. However, it’s certainly possible to achieve a near-perfect credit score.
Don’t Chase a Magical Number
Credit scores can influence a number of financial matters, including the terms of borrowing and interest rates. It’s also worth knowing how your credit score is affected by multiple factors, helping you strategise towards building a near-perfect number.
Moving from one band to another on the rating scale doesn’t happen overnight. Improving your score takes time and requires a lot of patience and perseverance. There can’t be a single magic number to achieve because different companies look at different aspects of potential borrowers. This means if you’ve checked all the boxes for one lender, you may not be the right fit for the other. Additionally, access to different information and different lending criteria means every lender has a different way of accounting for credit scores.
Instead of chasing the ideal number, focus your efforts on making sure your score falls in the good or excellent range. If it already falls in this range, ensure it’s maintained that way. A good or excellent score means your application is more likely to be accepted and offered better rates of interest and favourable terms.
Simply put, a perfect credit score is the one that fits your requirements and gets you what you desire.
3 Strategies for Gaining a Near-Perfect Credit Score in the UK
A perfect score may not be attainable realistically, but a near-perfect one seems possible to achieve. Achieving this astonishing feat requires careful management of your finances.
Here are some strategies to employ and achieve near-perfect creditworthiness:
1. Make Full and On-Time Repayments
The foremost step to careful financial management is to pay your bills in full and on time. Whether it’s your credit card bill or your mortgage, any missed payment gets recorded on your credit report.
This may signal to lenders that you’re having trouble managing finances or are financially stretched, which can negatively impact your chances of being approved for credit in the future.
Making repayments in full and on time shows lenders that you’re sensible with managing your money and debts and can afford to pay back what you borrow. This goes on your credit report as evidence that you’re good at managing your debts and increases your chances of boosting your credit score.
2. Limit Your Applications
Any application for credit puts an imprint on your credit report. However, too many of them in a short period can negatively impact your credit score. Multiple applications in a short time may indicate to lenders that you’re having difficulties applying for credit and also suggest a poor financial record.
Spacing out the number of your credit applications is the strategy to employ. Request a quotation search from your lender instead of an application search to compare rates. This method is less likely to leave a negative impression on your credit report.
3. Keep Your Credit Utilisation Low
Credit utilisation is the percentage of the credit limit in use. A lower credit utilisation limit is preferred over a higher one. For example, if your limit is £5000 and you have used £2500, this would mean that your credit utilisation is 50%. Maintaining a low credit utilisation rate—up to 25%—is viewed more favourably and can raise your score.
To Sum Up
The perfect credit score exists, but only on paper. Achieving the perfect credit score in the UK is an insurmountable feat; however, it’s difficult but possible to gain a near-perfect score. Every lender has a different way of accounting for credit scores because of access to different information and different lending criteria.
Instead of chasing a magic number, it’s ideal to keep your score in the good to excellent range to avail benefits and stay on the good side of lenders.