How to improve your credit score

Your credit score probably isn’t something you think about every day, but it’s something that can have a big impact when you might need a little help. Don’t worry though – if you’ve suffered with poor credit, you’re not on your own. Here are our tips on how to improve your credit score, so that it starts to help you, not hinder you.

What is a credit score?

Your credit score is a number that’s created based on your credit history; it looks at how you’ve managed your finances in the past.  Whether you’ve had credit before, how much credit you’ve taken out and how well you’ve managed your repayments will be considered to create this. 

Lenders use your credit score to base their decisions on whether or not to offer you credit. It will be taken into account whether you’re borrowing a lot - like a mortgage, or a little – like a small loan to pay for a new sofa, so it’s an important thing to be aware of.

Understand your credit score

Before you can do anything, you need to know what you’re dealing with, so you should start by checking your credit score online.    You can do this for free at websites like ClearScore, or can pay a small fee for a more detailed report.  Most credit reports will also give you an idea of what factors might be having a negative impact on your credit score, so you know what to tackle first.

Ensure that there are no mistakes and there’s nothing that you don’t recognise - if there is, get in touch with the Credit Reference Agencies (main ones in the UK are Experian, Call Credit and Equifax) and get them to investigate this.  Ensuring that your report is accurate is the first step to building a good credit score.

Meet and make all your repayments

If you’ve got a bad credit score, chances are you may have struggled to keep up with repayments in the past.  This is common – when you take out credit it might be manageable, but things can get on top of you.

To improve your credit score it’s important that you make all your repayments in full, on the date they were agreed.  It’s not just credit payments either, things like paying your utility bills or car insurance late will also have a knock-on effect. Every missed payment will have a negative impact on your score, but continuously making payments has a positive impact on your score.  If things are tight, look at your budget and work out what can be cut to ensure you can meet your repayments.  You will slowly start to see your credit score improve the more you do this.

Don’t make too many credit applications at once

If you make multiple credit applications in a short space of time, it can have a negative impact on your credit score.  It could imply that there is some reliance on credit, which doesn’t send a great signal, especially if you get rejected multiple times.

Only apply for credit when you have a real need for it and do your research about what products might be better suited to bad credit before you apply.  Putting in some extra time for research will mean you won’t need to apply to multiple places, which in the long run will have a positive effect on your credit score.

Register to vote

Being on the electoral roll at your current address is important, as it helps lenders when they do their initial searches. If you’re registered to vote it will allow them to easily verify your identity.  If you’re not already registered to vote at your current address, this is a simple and quick way of taking steps to improve your credit score.

Keep your credit usage low

There is nothing wrong with taking out credit if you need it. So if you have a credit card or overdraft, don’t panic, that’s not a negative signal.  In fact, if you don’t always use these products – for example if your credit card has a limit of £1200 but you routinely only use £100 - it will show that your credit usage is low.  This can have a positive effect because it shows that you’re not reliant on credit.

However, if you routinely max out your credit card or overdraft you should try and reduce the amount you use each month little by little – it won’t be something you can do straight away but small steps in the right direction will have a good overall effect on your credit rating.  You could also discuss reducing your credit limits to stop getting in to the same situation again.

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