Over 18 million Brits have a bad credit score, affecting their chances of borrowing credit in the future. Don’t let this happen to you! Read this guide to learn 15 easy tips to improve your credit score UK for 2020, making your financial future a brighter place.
Building up an excellent credit score (or credit rating), is a must, because it can impact your ability to borrow money. It’s not just about whether you can get approved for credit cards, mortgages, and loans, it can also impact opening bank accounts, mobile phone contracts and more. You can check your credit score for free to see how creditworthy you are. If it isn’t in the best shape, there are many things you can do to improve it. In this guide we provide the top tips to help get your credit score back on track.
The Best Ways to Improve Your Credit Rating:
- Register to vote
- Check your credit report regularly for mistakes
Check if you’re linked to another person to improve your credit score
- Make payments reliably
- Reduce credit applications
- Pay off your debts with your savings
- Draw up a budget and watch your spending habits
- Keep your credit utilisation low
Consider getting a credit-building card
- Moving houses a lot
Paying rent on time can build your credit score
- Cancel unused credit cards
- County Court Judgements (CCJs)
- Check for fraudulent activity
- Don’t withdraw cash on credit cards
Register your current address on the electoral roll. You can do this even if you’re living at home with your parents, or in shared accommodation. Your presence on the electoral roll is one of the key pieces of information which lenders use to verify your identity and your address. If you aren’t registered to vote, your credit score will suffer. You can register quickly online at the gov.uk website or by post. All you need is your National Insurance number.
Check your credit file carefully for any errors and ask lenders to rectify them if you do find any. Provide receipts or bank statements as proof if necessary. Even having a slightly wrong address on file can impact your credit score. So, make sure you check all the details and report any incorrect information immediately. Credit Reference Agencies such as Experian will send you a free credit score every month upon request. You can also check your credit report for just a small fee.
If you used to share a bank account, credit card, or other financial product with a spouse, friend or family member, then your credit score is linked to theirs. If they have a poor credit score, then it will drag yours down as well. You can complete a Notice of Disassociation to break their connection with you as a financial associate. Then your credit score will be calculated independently.
Make sure to pay your accounts in full and on time each month. This is the best way to show lenders you’re a responsible borrower, capable of handling credit responsibly. If you find it challenging to keep track of deadlines, set up a direct debit with your bank so that you make your payments automatically. Old, well-managed accounts will help to increase your credit score.
You should make no more than one credit application every 3 months since the credit searches will leave a footprint on your credit file. If you have a poor credit score, use the eligibility tools on the websites of financial institutions to see if you stand a chance of being accepted for credit. Using these tools don’t guarantee your acceptance but can inform you if they will refuse you. Ask whether creditors can use a soft or quotation search. Although the searches show on your report, they wouldn’t be seen by later lenders.
Details of savings accounts aren’t held on your credit file so they can’t be used to boost your credit score. However, unpaid credit cards or loan repayments can negatively affect your score. After weighing up the interest on savings compared to interest charged for borrowing money, think about using some of your savings to pay off some of your debts. Only do so if you’ll still have access to credit in an emergency.
Make a budget and stick to it. For 3-6 months, keep your spending down to the bare minimum. Use the money you save to make credit repayments larger than the minimum and reduce your overall debt. With a budget in place, you’re less likely to take cash advances on your credit card or require a payday loan to see you through to the end of the month. Such changes in your spending habits show someone who’s financially responsible.
Your credit utilisation is the percentage of your available credit limit you use. For example, if you’re credit limit is £1,000 and you used £500 of that, your credit utilisation is 50% – you are using half of your credit allowance. Usually, lending companies view using less of your credit limit positively and will help to boost your credit rating as a result. If you can, keep your credit utilisation to as low at 25%.
If you have low credit, you might want to consider getting a credit-builder credit card. These cards are for people with poor credit and or little credit history. By using these credit re-build cards to pay off your bills each month, you can prove that you are worthy of credit and improve your credit score. You will be able to apply for other forms of credit when your credit rating improves. However, be aware that these cards come with much higher interest rates than standard credit cards.
When applying for credit, lenders are much more confident to lend money if they see evidence that you have lived at the same address for a significant amount of time. Again this is a sign of financial stability. Make sure to keep this in mind!
Do you pay your rent on time? If yes, then great because this can boost your credit rating! The Rental Exchange Initiative is a free scheme which millions of social housing tenants and private renters can use to make paying rent build their credit file and improve their credit rating. Experian and The Big Issue Group launched this scheme in March 2016. It records your rental payments which Experian add to your credit file for lenders to see.
You may have cards and accounts that you no longer use but which are technically still active. These can kill your application. Access to too much available credit that you don’t use can be a problem. If you have a range of unused credit cards and lots of available credit, think carefully about whether you still need them and if not, cancel them. If they remain open, would-be lenders might be wary about how much credit you theoretically still have access to. They’re concerned about stability so try to keep accounts open which you’ve had the longest.
Lenders’ biggest concern is stability, so try to keep your oldest accounts open which you have had the longest.
Check that all addresses are kept up to date. You can flag discrepancies in your address as an alert when credit applications undergo fraud scoring.
Getting any court judgements for debt can seriously ruin your credit score. If you’re struggling with keeping up with payments, find free debt advice online .
If your credit file contains incorrect information, or it doesn’t apply to you, for example someone applied for credit in your name, contact the Credit Reference Agency straight away. You must inform them about the illegal activity, and they will update your file immediately.
Withdrawing cash on credit cards is expensive to do. Interest is higher, and the bank will charge you this even if you repay the amount you borrowed in full each month. Many lenders see this as evidence of poor money management.
The benefits of improving your credit score:
A higher credit score means that you have a bigger chance of getting approved for credit. This is because a high credit score indicates that you are responsible with your money and you have a history of paying your bills on time. Below is a list of benefits for building your credit score:
- Higher credit allowance – If you build up your credit score, you will be able to borrow more significant amounts of money helping you to reach your goals faster, such as home renovations and purchasing a new car.
- Lower interest rates – You will get better and cheaper interest rates on the credit you borrow if the lender sees that you are lower risk.
- Greater access to credit offers – A better credit score means that your chances of approval are much higher, and your range of credit choices will be much bigger.
Commonly asked questions:
How can I improve my credit score fast?
If you are looking to improve your credit score in a short time frame, there are many steps that you can follow. Some of these are, but not limited to, cleaning up your credit report, paying down your balance, paying twice a month if possible, opening new accounts, increasing your credit limit, and become an authorised user. You may also wish to negotiate outstanding credit card balances with your creditor.
How long does it take to improve my credit score?
This depends on several factors, but keep in mind that it isn’t something that can happen overnight. It requires both patience and perseverance. Information about things like your new bank account or credit card can take up to three months to get updated on your credit file. So it may take some time until you see real improvements to your credit score.
What is a good credit score?
A good credit score, as a figure, varies from one credit agency to another. TransUnion marks a 4 out of 5 score as good. Equifax scores anything over 420 out of 700 as good. Finally, Experian marks over 880 out of 999 as a good credit rating, while a fair credit score is between 721 and 880. However, it is essential to keep in mind that even with a good credit score, you are not guaranteed access to all financial products as lenders may look at more factors than just your credit rating.
How can I check my credit score?
You may use any of the three major credit reference agencies that operate in the UK to request a credit report online. These agencies are Experian, Equifax, and TransUnion (formerly CallCredit). While part of their services may be free, such as providing you with your credit rating number, giving you access to your full credit report can be an extra service for which these agencies will charge.