There are many things that you can do to increase your credit score. They are all relatively simple and well worth the effort, considering the importance of your credit rating.

If you already have a poor score, you need to identify the reasons for this and take steps to rectify the situation.

If you have a reasonable credit rating and wish to improve it, here are a number of things you can do to achieve this.

The first step is to get a copy of your current report. Read it, understand your credit report and check that all the information is correct. Compare it to your credit agreements and contracts to ensure the repayments are in line with what they should be.

Secondly, I would suggest compiling a detailed monthly budget, either for yourself or your family, according to your circumstances. Include all monthly expenses, not just credit repayments, and be sure to account for the inevitable unexpected costs. It is also a great idea, where possible, to allocate some money for contingencies and emergencies.

Tips to improve your credit score

1. Stick to your budget

Stay within your budget and fully understand any further debt you take on. I understand this sounds really basic but it so often happens that people do not stick to this basic principle.

2. Pay what is due when it is due

Always pay the full amount due and pay it on time every month. This is the single most important aspect as this is what lenders will look at to assess your payment habits. Short or late payments will negatively affect your score. The longer the history of regular payments, the better your score will be.

3. Keep repayments below 30% of your income

Try to keep maintain your credit utilization ratio below 30% of your monthly income. This requirement not only makes good financial sense but also forms part of the NCA. Affordability is another important factor that lenders have to consider when granting credit.

4. Reduce debt

Pay off debt instead of shifting them from one account to the next. The total amount of outstanding debt will have a detrimental effect on your credit score. Reduce revolving credit, particularly on credit cards. Reduce the debt but do not necessarily close the account altogether.

5. Do not have multiple credit inquiries

Every time an inquiry is made regarding your credit, it reduces your score. Numerous inquiries can have a negative effect on your score so only apply for credit or allow an inquiry when absolutely essential if you wish to increase your score.

6. Stability leads to a higher score

The longer you have lived at your current address and worked at your current job will impact favourably on your score. Someone that has worked at a company or been at their address for a short period is seen as less stable. The same applies to multiple previous jobs and addresses. A stable consumer is seen as a lower risk and easier to find if the debt is dishonoured.

7. Communicate if there is a problem

If you do find yourself in a situation where you are unable to meet all or part of your monthly payment for any reason, speak to the credit provider. Do not wait for them to contact you and never try to avoid the situation. By being proactive and containing them, in most cases, they will make a note on the system and come to some form of compromise with you. They will be a lot more accommodating if you contact them than if they spend weeks of frustration trying to track you down. Whatever arrangement you agree to, ensure that you honour the commitment.

Your credit score can be improved

If you have a poor credit record and a low score, it will make access to credit more difficult but it can be repaired. It will take time, effort, and discipline but if you follow these tips for some time, your credit score will gradually increase, Maintain these good habits and you will ultimately have a good credit score.