credit score

How to Improve Your Credit Score

March 08, 2022

How to Improve Your Credit Score

Your credit score matters. You have a better chance of getting approved for credit with a good credit score. However, it can affect your ability to receive credit cards, loans, mortgages, and mobile contracts.

If you’re looking for ways to improve your credit score, try these simple steps below.

Show your address

Register to vote at your present address, even if you share a flat or live with your parents.

Create a credit history

A lack of credit history can make it difficult for organisations to appraise you, lowering your credit score. This is a challenge for young people and immigrants. Fortunately, there are things you may take to improve your credit history.

Pay your bills on time

Paying your bills on schedule and in full each month shows lenders you’re a responsible borrower. Old, well-managed accounts usually help — but read more on the impact of unused credit cards.

Low credit utilisation

Usage percentage refers to your credit limit usage. For example, if you have a £2,000 credit limit and have used £1,000 of it, your credit utilisation is 50%. Lenders usually prefer lower percentages, which raises your credit score. So try to maintain your credit utilisation below 30%.

Examine your report for errors and report them

Even minor errors, like misspelling an address, might lower your score and cause a lender to deny you credit. Check your credit report to ensure all information is accurate and current. If you see a mistake, contact the supplier and request a correction. 

Check your credit report for fraud

Fraudsters could misuse your personal information to obtain credit in your name without your knowledge. Therefore, it is worth regularly checking to see if any errors are on your credit report and then report them to your provider as soon as possible.

If you can, avoid frequent house moves

While this isn’t always attainable, keep in mind that lenders prefer to see stability. Lenders may suspect you of having problems paying rent if you move frequently. Learn why your address matters in your credit history.

Retain old accounts and reflect a long history

It’s good to show lenders you can manage many credit accounts, especially over time. The lenders will reward a long history of credit accounts and just utilising a tiny fraction of your credit limit. See our article on what to do with unused credit cards for more.

Get a credit builder card

A credit builder card might help you rebuild your credit rating. They usually have limited budgets and high-interest rates. Getting your first credit card may temporarily lower your score. Used properly, it can help you improve your score.

Credit builder cards work well if used for a small amount each month (on everyday essentials you would buy anyway). Then pay off the card in full each month to avoid paying interest.

How can I improve my credit score?

Companies regard you as less risky; thus, you are more likely to be authorised for financing. In addition, a good score implies you have a history of appropriately managing your credit, such as paying your bills on time.

Among the benefits of boosting your score:

Better credit, mortgage, and loan approval chances

A higher credit score signifies a better likelihood of getting a loan, credit card, or mortgage. You may also be able to compare more credit offers and providers, saving you money.

Lowered rates

If lenders believe you are a reduced risk, they may offer you lower interest rates on loans and credit cards. A strong credit score can help you get a low-interest loan or a 0% credit card.

Cheaper car insurance

Your credit score can impact the interest charges you pay on top of your insurance premium if you opt to pay over a year.

Loads of credit

If you raise your credit score, you should borrow more money. This might help you buy a new automobile or make house modifications faster.

Time to increase credit score?

It relies on several factors, but it won’t happen overnight. New accounts or credit cards can take several weeks to appear on your credit record, so meaningful gains in your score may take longer. You may also need to wait a few months for new accounts to start helping your credit score.

Paying your bills on time will help you create a credit history. Late payments, defaults, and court judgments are reported for six years. The impact of late payments or defaults will undoubtedly diminish with time. Defaults will be removed entirely after six years.

Four ways to improve your credit score

Limit credit requests

Frequent credit applications can make lenders assume you’re overly reliant on credit, hence a more significant risk. No matter what type of credit or how much you want, each application records a hard search on your report that companies can see. So, spacing out your credit applications — one every three months is a decent rule of thumb, but lenders’ criteria can vary.

Avoid defaulting

Defaulted accounts occur when a customer’s relationship with the company deteriorates due to missed payments. Defaulted accounts might harm your credit score.

Do not overborrow

Debt problems can lead to County Court Judgments, Individual Voluntary Agreements, or even bankruptcy. These items will appear on your credit record for six years and will significantly lower your credit score.

Be wary of fraudsters

Keeping an eye on your credit record for symptoms of fraud could help protect your score. For example, an increase in your debt or applications you didn’t make could indicate fraud. If you are a victim of fraud, your lenders should immediately repair any damage to your credit report after investigating the facts. If you contact us, we can assist you in fixing your credit report.