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How to improve credit score

How to improve credit score

Three steps to success

Why is a good credit score important?

If you want to borrow money, lenders look at your credit score before deciding to offer you a loan. Whether it’s a personal loan or credit card application, a good credit score will increase your chances of being accepted for credit.

Credit scores typically range from 0 to 999. The higher the score, the better the credit. A high score makes you look more likely to repay, which comes with the following benefits:

  • Better chance of approval
  • Access to the best offers
  • Higher credit limit
  • Lower interest rate

What can you do about a low credit score?

There’s no set ‘acceptable’ credit score. As a general rule if you have a low credit score, you’re less likely to be accepted by lenders.

You might be wondering, why is my credit score low? It could be because of a number of things, including:

  • Being declared as bankrupt
  • Missing or being late on payments
  • A big change or spike in the amount of credit you use
  • Only making the minimum monthly repayments each month
  • If you’ve never borrowed any money and have no credit history
  • If you’ve just moved to the UK

But there's no need to panic. There are ways you can improve your credit score that will immediately start to make a difference.

Three steps to improve your credit score

If you’ve failed to stick to your previous or existing loan agreement terms, your credit score may have taken a hit. Follow our ways to improve your credit score to get in the good books and boost credibility with lenders.

Step 1: Check your credit score

The more you keep an eye on your credit score, the better prepared you’ll be to improve it quickly. In the UK, you can check your score with a credit reference agency.

Most credit reference agencies offer a free service to check your credit score for the first time. To check regularly, you may need to pay a monthly fee.

The main credit reference agencies:

Whichever agency you go for, you’ll need to sign up and share your personal financial information. Once you’ve confirmed your identity, you’ll have access to your credit report and credit score.

Keep in mind lenders use credit reference agency data to give them an idea of how likely you are to pay back what you’ve borrowed. So, they may have a record of your information from the credit reference agency.

Step 2: Make sure your data is up-to-date

You can immediately improve your credit score by updating any out of date information in your credit report. You might be unfairly refused credit if your personal information is old or incorrect.

How to improve your credit score - check these details are correct:

  • Personal information such as your name, including any previous names you have been known by and marital status
  • Current and past addresses, as well as addresses you’ve been linked to
  • Details of bank accounts, credit cards, loans and mortgages
  • Store credit accounts and utility contracts
  • Any individuals you are financially tied to
  • Late payment information
  • The search history of your credit report
  • Your electoral roll entry
  • Any past bankruptcies, insolvencies or court judgements
  • Any CIFAS fraud warnings connected with your address

How to resolve any issues

When you’re updating your details, you may need to take further steps to put things right. Here are the most common issues and how you could resolve them to improve your credit score:

  • Are you connected to someone with low credit? Whether it’s a family member or owning a shared business, you may no longer want to be financially associated with them. You can file a disassociation form from a credit reference agency to remove your connection with someone.
  • Register to vote: If you’re not registered to vote it will affect your credit score, you can register or update your details here.
  • Avoid fraudulent activity: If you suspect you’ve been the victim of fraud, you’ll need to make sure the fraudulent activity isn’t recorded on your credit report. It’s best to check all individual credit reports at least once a year. If you have an issue with the information contained on the report, contact the credit reference agency as soon as possible.
  • Avoid sending off too many applications: Each time you apply to borrow money, it’s recorded on your credit report. You should be wary about sending off multiple applications, especially without checking if you’re likely to be approved. It will raise a red flag to lenders that you desperately need the cash.
  • Don’t mix business and pleasure: If you have a business, you may need to pay some unexpected large payments with a credit card. Keep any business payments separate from personal as it could look like you’re spending more than usual and raise concern with lenders.

Step 3: Be a responsible borrower

To make a real difference and improve your credit score, you’ll need to be proactive. Prove to lenders you can manage credit responsibly by:

Paying the bills on time

Many of the bills you pay, such as utility bills or a phone contract, will be shared with credit reference agencies. Make sure you pay them on time to keep your credit score looking healthy.

Always meet the minimum monthly payment

At the very least you need to make sure you are paying the minimum monthly repayment to any borrowed money. Any late or missed payments will have a negative impact on your score.

Add your name to bills

If you’re living in a house share or with family, you may not have your name on any bills. Bills are considered a form of credit, so by adding your name to any bills, it will show you are responsible.

Using your credit card responsibly

Show financial organisations that you can successfully manage credit by using your credit card regularly and meeting all the payments. You can start with smaller payments so it feels more manageable and pay off your bill in full each month.

Keep your utilisation rate low

Your utilisation rate is the ratio of outstanding credit card balances divided by your credit limit. Try to keep your utilisation below 30% to show you can manage your money sensibly.

Keep a healthy bank balance

When possible, try to maintain a healthy balance and avoid using your overdraft. If you’ve got a lot of existing outstanding debt, try to pay this off as a priority.

Apply for The Rental Exchange for Tenants

If you’re a social housing tenant or renting privately, you can improve your credit score by paying your rent on time. The Rental Exchange captures an online history of your rental payments to prove you’re a reliable customer. Find out how the Rental Exchange could help you.

How long does it take to improve credit score?

A lot of people want to know how to improve credit score fast, but there is no set time it takes. It depends on personal circumstances. If you’ve missed just a few payments, and have followed steps to boost your score, you may see a change in just a few months. Simple steps like ensuring your personal details are correct can have an immediate impact on the process of improving your credit score.

If you’ve got more serious financial issues, such as bankruptcy, it will take longer to improve your credit score.

After more information?

Check out our illustrated guide to credit scores to see exactly how they work. You can also find out more about credit reports with our detailed breakdown.

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Understanding credit reports

Now you know how to improve your credit score, get the lowdown on how credit reports work so you can better understand them.

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