How to improve your credit score

Your credit score gives an indication about the state of your financial history. Unfortunately, improving your credit score is not an easy fix – you will have to change your financial behaviour and stick at it for a while.

Your credit score is calculated from the past six years of your financial behaviour, which you can find on your credit report. Your report is held by three different credit reference agencies (CRAs): Experian; Equifax; and TransUnion / CallCredit.

Lenders determine your creditworthiness according to their own, top secret, algorithms – they do not see the same scores you do and nor do you see the score they award you.

However, if you want to improve your credit score, here are six steps you can take.

1. Register to vote

Voting and improving your credit score may not seem related, but you will find it very difficult to be approved for credit if you haven’t registered to vote.

Simply registering to vote is enough – you do not actually have to vote. You can sign up online or by post.

It is possible to remove yourself from the “open” register (to avoid your personal details being bought by any third parties) while remaining on the electoral register.

2. Check for errors or fraudulent activity

Before applying for credit, take the time to look carefully through your file. If you spot a mistake, such as an incorrect address, get the credit reference agency to rectify it.

Discrepancies between your credit file and any credit applications you make will most likely count against you.

You should also take urgent action if you see any activity on your file that you know for a fact you are not responsible for.

For example, if there is a credit application you know you did not make – it could mean someone is using your identity to rack up debt on a credit card, for which you’ll be liable. Again, contact the CRA immediately to have it removed from your file.

Make sure there is a ‘notice of correction’ on the file too, to make it explicitly clear that you were not the one at fault and thus that your credit score should not be negatively affected.

Find out more about credit scores here

3. Already have credit? Always pay on time

If you already have credit whether it’s a loan, credit card or mortgage, it is imperative to pay on time, every time.

Consistently paying in full will have a positive effect on your credit score.

In the case of a credit card debt, paying the minimum amount is better than missing a payment – but doing it repeatedly will negatively impact your score because it suggests you’re in the habit of spending more than you earn.

4. And if you do not have credit, get some

Without a credit product, you have little evidence you can effectively meet payments so lenders cannot clearly see that you will repay your mortgage.

While your mobile phone contract and other utility bills can help build up your credit history, an interest-free credit card you know you will be able to fully pay off every month will do the most to boost your score.

Think carefully about how much credit you will actually need. If you get a credit card limit of £1,000, but generally only use about £200, it could count against you, even if you pay it off in full.

Similarly, exceeding your limit or regular attempts to extend it might make you look financially untrustworthy.

If you have lots of smaller debts spread across a number of cards, you could try consolidating them onto one 0% balance transfer card or 0% money transfer card instead.

Having just one bill to pay will make it easier to keep a close eye on your debt and so start reducing it.

5. Consider your financial associations

If you currently have or have had a joint credit card, loan or mortgage with another person over the past six years, your credit history will be linked with theirs – this is known as financial association.

If your financial associate cannot meet payments on time and has dints in their credit history, it will reflect badly on you. You might not see your credit score change, but it will still affect your chances of securing credit in the future.

In order to end a financial association, you first need to close the joint credit product you share with that person, or move it to an individual account.

You’ll then need to contact the CRAs to add a ‘notice of disassociation’, which should prevent any of their future activity from having repercussions on your credit file.

6. Do not forget defaults, County Court Judgments or bankruptcies

If you have failed to make payments – usually over a three to six month period – a lender will close your account: this is known as a ‘default’.

Defaults are recorded on your credit report, they will decrease your credit score, and it will be much harder for you to acquire credit in the future. Unless a default was created in error, it will remain on your credit file for six years.

In some instances of missed payment, the lender may even bring a County Court Judgment (CCJ) against you. Provided you pay what you owe within 30 days of the CCJ being issued, it should not appear on your credit file. Otherwise, it will remain on your file for six years.

You can try and reduce the impact of either of these by telling CRAs why you missed payments in the first place (for instance if you have a long-term illness or were made redundant) and they will add a note to your file that lenders will see.

However, if you are now able to make repayments, doing so will help improve your score again.

If you have had to go to the extreme of declaring yourself bankrupt, that is a very difficult mark on your credit file to rub out.

You can try and lighten its impression with consistently good financial behaviour, but you cannot remove it completely for six years.

See our guide on credit cards for those with bad credit

What is a bad credit score?

Having a bad credit score means you may find it more difficult to get a credit product because it’s an indication of problematic financial behaviour, such as being late with, or entirely missing, repayments.

But what is a _bad _credit score? Not only do lenders each have their own scoring systems, so too do the three CRAs:

Experian – below 721 (out of 999)

  • 0 to 560 is considered very poor
  • 561 to 720, poor
  • 721 to 880, fair
  • 881 to 960, good
  • 961 to 999, excellent

Equifax – below 380 (out of 700)

  • 0 to 279 is considered very poor
  • 280 to 379, poor
  • 380-419, fair
  • 420 to 465, good
  • 466 to 700, excellent

TransUnion / CallCredit – below 566 (out of 710)

  • 0 to 550 is considered very poor
  • 551 to 565, poor
  • 566 to 603, fair
  • 604 to 627, good
  • 628 to 710, excellent

The key thing to remember is, having a bad credit score is not a permanent state – it is reversible.

However, if you are in real financial difficulty and in serious debt, improving your score need not be your priority – getting out of debt and back into the black should be.

There is plenty of free, impartial help available to you from debt charities like StepChange, so there is no need to go it alone.

Now read our guide on mortgages for those with bad credit

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Last updated: 18 March, 2019

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