5 ways to transform your credit score & eliminate debt in 2023

Essentially a credit score is a tool for lenders draw information from to predict the future. The score, and more importantly credit report, presents a snapshot of how likely you are to repay the money that they lend. Here, Sam Covington at Finbri reveals 3 ways to improve your credit score along with saving hacks that work to eliminate debt in 2023.

Be Strategic + up the ante.

Credit card providers monitor how much of your credit limit you are using. This is called, credit utilisation. Using less than 30% of your overall credit limit ensures that your credit score is stable. In fact, the highest credit scorers use an average of 7% of their available credit. If you are confident that you will not spend unnecessarily, increasing your credit limit whilst keeping the same balance will lower your credit utilisation and in turn, positively impact your credit score. Remember, this is only if you do not further spend on the credit card.

Get your facts right.

Before you work to improve your credit score, familiarise yourself with exactly what it takes into consideration. It’s a common misconception that lenders and scores consider student loans but don’t look at utility bills. Missed payments towards your utility bills certainly impact your score. Ensure that you know exactly what you are seeking to improve and that they will improve your credit score.

Ensure you hit close!

Paying off a credit card and never using it again may seem like a good thing however, dormant accounts do in fact have a negative impact on your credit score. If you hold any accounts that are dormant, ensure that you close them. Keep all records up to date, whether that’s the accounts you are using or the electoral role.

How to save lump sums to put towards your credit card:

Started with a penny now I’m here (£667).

A simple saving challenge that is perfect to begin in January although, you may start it in any month if you wish to save less. Save 1 penny on the first day of the year/month if later in the year, 2p on the second day, 3p on the 3rd and so on. The maximum that you will be required to save is £3.65 on the last day of the year. If you wish to backdate this process to the first of the month, you will save a total of £667.

The lucky number 7 challenge – £364

Set up a standing order that transfers £7 into a savings account at the end of every week. This will accumulate £364 by mid-January next year. If £7 is not financially viable, reduce the figure to one what works for you. Of course, you can also alter the weeks to biweekly or monthly.

Every other week

Choosing to put money aside every other week can feel less intimidating than practicing the process daily or weekly. Every other week, put aside amounts in multiples of 4. £4 in the first week, £8 in the second instalment and so on. Ultimately, this can save you up to £1,404 by this time next year.