‘Avoid getting stung’ – things you need to know about your credit score

Martin Lewis offers advice on credit scores

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Managing and maintaining a credit score is an important part of one’s financial health. There are many pitfalls when it comes to credit, but these exclusive tips from Moneysupermarket could help people stay on top of their score.

The first step to building and boosting a credit score

“If you’re looking to boost your credit rating then credit cards can help do this.

“If you want to improve a poor or limited credit rating, then consider credit builder credit cards, as they create better borrowing habits whilst helping you with your current financial situation.

“As these products are designed for those with a poor credit rating, they can charge higher interest rates than a typical credit card, so make sure any repayments are made in full each month to avoid paying any interest whatsoever.

“Furthermore, as you pay off your balance consistently, you’re slowing building your credit rating by showing that you can borrow and pay back money over a period of time.”

What is a credit card APR?

“An Annual Percentage Rate or APR is calculated by taking into account the interest rate on a credit card (or another borrowed sum) and any other charges such as an annual fee or arrangement fee.

“APRs are used to compare credit card offers, making the process of finding the right card a little less complicated.”

Plan around payday

“Credit cards can be a more convenient way of buying large ticket items that you need but can’t necessarily afford to pay for in full.

“The plus is that you have flexibility – you don’t have to pay for the item until your payday cheque lands in your bank account.

“Used smartly, you can even spread the cost over several monthly repayments if the interest rate on the credit card is low or negligible, so you don’t feel any financial pressure.”

Clear outstanding debts

“If you have any outstanding debts then it’s worth looking into a balance transfer credit card.

“This will allow you to transfer existing debts on to one credit card account, usually with lower or no interest applied.

“Essentially, this will mean you reduce the amount of money you pay on interest on the total amount transferred, which will enable you to pay off the existing debt more quickly.”

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Reap benefits through rewards and cashback

“If you plan on using a credit card for regular spending, you could take advantage of one with varying rewards and incentives on offer.

“For instance, if you’re a keen shopper you might find a cashback or store credit card to be ideal.

“On the other hand, if you’re a jetsetter who flies frequently then you might prefer an airline credit card.

“Always remember to read the small print and check the interest rates on products before committing.”

The joys of responsible, interest-free spending

“Do you need to make a big purchase? Haven’t saved up enough yet? Some credit cards offer a zero percent interest period that effectively lets you borrow for free – providing you make your monthly payments.

“Even if you pay the minimum amount required per month, you’ll still be borrowing interest free until this period ends.

“At this point it would be best to completely pay off your debt, otherwise you could be placed back on the provider’s standard interest rate – which can be quite high.

“You might also be placed back on the standard rate if you miss a payment or exceed your credit limit.”

Protect your purchases

“If something goes wrong when you make a purchase on a credit card then you can claim back the cost from your credit card provider

“For instance, the selling company goes bust or if the purchase is faulty or goes missing.

“This is because any purchases you make between £100 and £30,000 on a credit card are protected by Section 75 of the Consumer Credit Act.

“You’ll also be able to claim for a refund if your credit card is used fraudulently, as long as you weren’t negligent with it – read more with our guide to credit card security.”

Safer spending online

“If you buy something with your credit card and the item is faulty or damaged or it never arrives, your credit card provider should be able to help you get your money back.

“Under section 75 of the Consumer Credit Act, you’re covered if you use your credit card to buy something such as a computer, an item of furniture or a holiday that costs over £100 and up to £30,000.

“This means the credit card company has equal responsibility (or ‘liability’) with the seller if there’s a problem with the things you’ve bought or the company you’ve bought them from goes bust.”

Keep up with payments

“Set reminders and use your calendar to plan ahead to avoid getting stung by any unwanted charges – organisation is key.

“You can even set up a direct debit on a day that works for you. If you do miss payments for utilities, a mobile phone contract, or other items then there can be consequences, and this could negatively impact your credit score.”

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