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08 Jun 2020
Jamie Gibbs Alice Campion

How do I improve my credit score?

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Person checking their credit score

Lenders will look at your credit score if you want to take out a loan. Here's how you can improve yours.

If you’re looking to get a loan, you’ll usually have your credit score checked.

If you’ve got a high credit score, you should be able to borrow more money – plus a few more added perks. But what about if you have a low credit score?

Luckily there are some simple things you can do to improve your credit score. Let’s take a look.

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Key points:

  • Use a credit card little and often

  • Make sure you have an accurate credit report

  • Get on the electoral roll

  • Avoid multiple credit applications

  • Use an eligibility checker

  • Pay your utility bills on time

  • Look out for fraud

Jump to tips on improving your credit score

What is a credit score?

Your credit score is a three-digit figure. It gives credit lenders an idea of how successful you are at borrowing money and paying it back.

The figure varies, and it’s determined by a credit reference agency (CRA). 

There are three credit reference agencies:

  • Experian

  • Equifax

  • TransUnion (formerly Callcredit)  

 

 

What is a good credit score?

The general rule is: the higher your credit score, the better.

A high credit score shows lenders that you’re likely to pay back your loan on time, making you less of a risk.

Each of the CRAs measure credit scores differently:

  • Experian scores between 0 – 999

  • Equifax scores between 0 – 700

  • TransUnion scores between 0 – 710

Experian and Equifax divides the score into different bands ranging from very poor to excellent. 

Transunion use a rating system from 1-5 where one is very poor and five is excellent.

The bands are:

 

Rating band

Experian

Equifax

Transunion (rating 1-5)

 Very poor

 0-560

 0-279

 0-550

 Poor

 561-720

 280-379

 551-565

 Fair

 721-880

 380-419

 566-603

 Good

 881-960

 420-465

 604-627

 Excellent

 961-999

 466-700

 628-710

 

Why should I improve my credit score?

A high credit score is good for a few reasons. Firstly, you can borrow more money. And you could also get better interest rates.

 

How can I improve my credit score?

Your aim is to try to show lenders that you can manage your finances. There are a few ways you can do this:

 

Using a credit card 

A credit card is a good way to show lenders you can manage your finances.

If you have a credit card, use it little and often and pay it back regularly.

Try not to frequently use up to your credit limit either. Otherwise known as “Maxing out” your card.

 

Get an accurate credit report

A credit report is a record of your credit history. It gives lenders an idea of how you’ve handled credit in the past.

It’s important to make sure this information is accurate. The more accurate it is the more reliable you’ll seem to a lender.

If your information is accurate you can’t change it. But you can explain some of the information on there by adding a notice of correction.

This is usually 200 words explaining reasons for any late payments.

If there’s a factual mistake, for example your personal information is wrong, you’ll need to dispute this.

If it’s an error, the credit reference agency – Experian, Equifax or TransUnion – will have to correct it.

Everyone is entitled to a statutory credit report for £2. You can get this from credit reference agencies.

 

Get on the electoral roll

If you haven’t already, get yourself on the electoral roll by registering to vote.

This looks good to lenders because you can prove you live at your address, making you seem more stable.

You can check if you’re on the electoral roll with your local council.

 

Avoid multiple credit applications

When you apply for credit, lenders perform what’s called a “Hard search” on your credit history.

A hard search is when a lender looks closely at your lending history and credit report.

This will show up as a mark on your credit report, and will usually stay there for 12 months.

Making a lot of applications in a short time could look to lenders like you’re desperate for credit.

If you’re rejected for credit, try not to apply for more credit immediately. Wait a while or use an eligibility checker before you apply.

 

Use an eligibility checker

If you’re applying for a loan, or you’ve been rejected for credit in the past, try using an eligibility checker.

To see if you can apply for a loan, the lender will perform what’s known as a “soft search” on your account. This is when they check some information, but not your full report.

You can have an unlimited number of soft searches on your account, and they won’t show up on your credit report.

The eligibility checker will give you an idea of whether you’ll be accepted for credit. It could save you from getting rejected and potentially applying multiple times.

 

Pay the utility bills

Having your name on some bills – like your mobile phone or gas and electricity – shows lenders you can manage your finances.

But only If you pay them on time. Late payments can damage your credit score, so it’s worth setting up direct debits every month so you don’t forget to pay.

 

Look out for fraud

Fraudsters can take out credit applications in your name, which can affect your credit score.

Keep an eye on your credit report for any applications you don’t recognise. Don’t ignore your post either, especially if they’re from lenders you don’t recognise.

Bad credit loans

If the above hasn't managed to get your credit score to where you'd like, it might be worth applying for a loan from a range of bad credit specialist lenders.

These lenders will be able to offer loans to those with poor or no credit history but with higher interest rates than a regular loan so make sure to read all the information we have on site before applying.

 

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