How to improve your credit score

In this guide, we’ll cover the main things you need to know about building your credit score.

How do credit scores work?

There are three main credit reference agencies in the UK, each collecting information about you from public records, lenders and other service providers, before generating a ‘credit score’.

When you apply for credit, lenders and service providers usually contact their preferred credit reference agencies to check your credit record, highlighting any potential risk of offering you credit.

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Why is a good credit score important?

  • The higher your credit score is, the more likely it could be that an application for a mortgage, credit card, personal loan, overdraft or car finance will be accepted.
  • Depending on the type of borrowing, the lowest and longest lasting interest rates might be offered to low risk applicants, who’ve shown they can manage credit well over time.
  • Your credit score can also affect the amount of credit you’re offered.
  • Bad credit might affect your ability to get some jobs, e.g. in legal or financial services.

How long does it take to improve your credit score?

The short answer is, building your credit score isn’t quick, but there are small steps you could take which might make a difference over time.

It’s worth knowing though, if you’ve experienced difficulties with credit in the past, things like Defaults, County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs) and bankruptcy can impact your credit score for up to six years.

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Ways to improve your credit score

Below we’ve outlined some of the main things you could do to boost your credit score, potentially helping you to access new borrowing in future.

Get on the electoral register

Being on the electoral roll is one way that your identity and home address can be confirmed, which could help to improve your credit score.

Manage accounts carefully

Lenders and service providers will report arrears, missed, late or defaulted payments, and if you go over your agreed credit limits.

Use a bank account

Setting up Direct Debits to make regular payments could boost your credit score over time. Just make sure there’s money in your account to cover any payments, or you could find your credit score is negatively impacted, not improved. Carefully using and managing an arranged overdraft could also help to improve your credit score.

Put down roots

Your address links your financial activity and identity, helping to prevent fraud. Having the same address for a long time also suggests your circumstances are fairly stable.

Know what counts

It’s not just mortgage, credit card, loan, car finance and overdraft repayments which you need to keep up with. It’ll also help to carefully manage store cards, mobile phone contracts, TV subscriptions and other household bills.

Apply with caution

Whether or not you’re accepted, ‘hard’ credit searches could affect your credit score, especially if you make a number of full applications in a short period of time. Some lenders offer 'soft' credit checks or quotations on selected products, which could help you to understand your eligibility, without risking your credit score.

Keep spending in check

If you’ve got a lot of debt and are regularly close to your credit limits, it could suggest you’re reliant on credit.

Check and correct info

It’s a good idea to review the details held by the credit reference agencies. If you spot something that’s wrong, you could submit a data dispute to the relevant agency, so they can investigate and update their records.

Joint accounts count

Things like bank accounts, mortgages and even utility bills could create a financial link between you and any joint account holders. This could impact your future credit eligibility if the joint account holder doesn’t have a good credit score.

People you’re linked to financially will show on your credit record. If you’re no longer linked to someone, you could contact each credit reference agency to submit a notice of disassociation.

Use a mixture of credit options

Having a range of credit accounts shows you can manage different types of borrowing, from unsecured credit cards and loans, to secured lending, like a mortgage. If you don’t use credit at all, your credit score could be low, even if you have a good income.

Reduce existing debt balances

Lenders are more likely to offer new credit to people who don’t have lots of debt already, so it’s a good idea to keep your debit balances to a minimum.

Build your account history

The average age of your active credit accounts could also affect your credit score. Having the same accounts for a long time suggests you’re good at managing them well.

Deal with financial difficulties early

Lenders could offer support if you’re struggling to manage your financial commitments, and independent support is available from third party organisations. Defaults, County Court Judgements (CCJs), Individual Voluntary Agreements (IVAs) and bankruptcy will all negatively affect your credit score for up to six years, so they’re worth avoiding.

A summary on improving your credit score

It’ll take time, but building your credit score could give you access to better borrowing options.

  • When you apply for credit, amongst other things, lenders and service providers check your credit record as part of their decision-making process.
  • If you have a good credit score, you could be offered lower interest rates and higher credit limits.
  • You might be able to build your score in a number of ways, from making sure you’re on the electoral register and managing accounts well, to limiting new credit applications.
  • The information held by each credit reference agency can differ, so it might be a good idea to check your credit scores and reports with TransUnion, Experian and Equifax.

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