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How to improve your credit rating

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There are a number of ways to boost your credit score that could increase your chances of being accepted for a car finance deal, loan or credit card. We show you how.

A rubber erasing the words 'bad credit'

What is a credit rating?

In a nutshell, your credit rating says how risky you are when it comes to borrowing money.

There are three credit bureaus in the UK that calculate credit scores - Experian, Equifax and Call credit. Each of these calculates slightly differently. And different lenders use different bureaus, or a combination of the three, to see your credit score. 

As well as your credit score, lenders can see other information such as missed payments, any CCJ’s or bankruptcies from the last six years and your previous addresses. They’ll use this as a way to predict how likely you are to keep on top of your payments.

Your credit score will help the lender to decide if they want to lend to you and the interest rate they will charge. 

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What's in a credit report?

Your credit report contains information about your borrowing habits to help lenders evaluate your credit history. This includes:

  • your personal details and previous addresses.

  • any previous names you may have had.

  • details of anyone you share a financial account with.

  • details of any CCJs or bankruptcies from the last six years.

  • previous searches made on you by financial companies.

  • every application you’ve made for credit in the past six years.

You may be able to improve your credit score by making sure these details are kept up-to-date, and can add notes to any records you feel are incorrect.

Why are people declined credit?

Woman with empty handbag

It’s not all smiles and sunshine, however. Lenders will refuse credit to anyone whose credit score doesn’t fit their profile of a good borrower.

There are a number of things that can impact your credit score, and which can hurt your chances of getting a credit card:

  • Not being a homeowner.

No house means no mortgage, which means you have less of a track record in making timely repayments.

  • Having multiple credit accounts.

If you already have several sets of debt, lenders may be nervous about you owing even more money.

  • Making multiple applications within 12 months.

If you’re applying for credit left, right and centre, lenders may think you’re desperate for extra cash.

  • Not using direct debit.

A pay-as-you-go lifestyle may indicate that you can’t budget your finances well enough to make consistent repayments.

  • Not having a credit score.

If you’ve never borrowed money, you might not have a score at all. You may think this shows you’re good with money, but to a lender you’re an unknown risk.

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How do I find out my credit rating?

Four of the most popular places to find out your credit rating are Experian, Equifax, Clearscore and Noddle.

It’s easy to access your credit information for free so don’t get caught up paying a subscription to see it.

With these you can see your credit score as well as anything that could harm your rating e.g. unpaid bills or multiple applications for credit.

You’ll also be able to see which agencies have run credit checks against you.

These include both “soft” credit checks (won’t impact your credit rating) and “hard” credit checks (do impact your credit rating). 

Some lenders may see too many hard credit checks as a sign of financial distress and may be less likely to lend to you.

Check out our section on credit checks for more information and to apply. 

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What can I do to improve my score?

The idea here is to turn yourself into the perfect borrower, at least in the eyes of a car finance, loan or credit card company. To do this, it helps if you:

  • Get yourself on the electoral register.

Lenders use the electoral roll to check your name and address. Keeping your details up to date here makes life easier for them and, ultimately, you.

  • Pay all of your bills on time - ideally by direct debit.

Showing that you can manage your money is a must. A few days can make the difference between your score going up and going down.

  • Make sure the details on your credit report are accurate.

Keeping these details up-to-date is not only good practice, but could help you spot mistakes and potential fraud.

  • Try not to use more than 50% of your credit limit.

This shows that you don’t live up to the wire with your debt.

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If you have a thin credit file with little borrowing history there are a couple of additional tips that may help.

  • Take out a credit card

You only need to spend a little on it each month to start building a credit history. Remember, set up a direct debit to pay it off at the end of the month so you don’t get caught by interest charges. This will demonstrate to lenders you can borrow responsibly and pay back on time.

  • Try to get a bill in your name

If you do this and set it up to pay by direct debit lenders will see that you can reliably pay for credit on time e.g. a phone contract or utility bill.

To read more on improving your score, see our how to get car finance on bad credit guide.

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