Ways to increase your credit score
Achieving a stable UK credit score – also known as a credit rating – is crucial when looking to borrow money. Whether that’s in the form of a credit card, a mortgage or a store card, companies will want to know whether they can rely on you to pay back the money that you have borrowed.
If you’re currently sitting on an adverse credit rating or are looking to build your credit history, we’ve put together a guide to point you in the right direction.
What is a credit score?
Your credit score helps lenders to determine how much of a risk you pose to them when borrowing money. It gives an indication of how likely you are to repay lenders by considering factors, such as your previous repayment tendencies, to express your creditworthiness. The higher your credit score is, the more likely you are to be accepted for credit.
For further information about credit scores, read our Complete Credit Score Guide.
How do I check my credit score?
There are a number of UK credit reference agencies (CRAs) online, such as Expedia and TransUnion, who offer credit checks that will inform you of your credit score. The scoring systems used by these agencies vary, so you might receive a different figure for your Experian credit score than you do for your TransUnion credit score, but lenders will often use more than one agency in order to develop a better view of your credit rating.
For a free credit check, you can use Checkmyfile (free for the first 30 days then a £14.99 monthly fee applies after, but it's easy to cancel if you don't want to pay), which uses the four main CRAs (Equifax, Experian, TransUnion and Crediva) to give you a fuller, more detailed report.
You can also receive a free credit check with websites such as ClearScore, Credit.com and TotalMoney, however, these will not be as detailed as Checkmyfile or the paid services offered by Experian or TransUnion.
What is a good credit score in the UK?
There is no single answer to this, as every CRA uses a different scoring system when judging your credit rating.
Why should I improve my credit rating?
If you have a bad credit rating, you will find that it is far more difficult to attain credit. This can cause problems when trying to buy or rent a house, lease a vehicle or take advantage of 0% interest store card and credit card offers.
How can I improve my credit rating in the UK?
If you’re suffering with a bad credit rating, the chances are that you’d like to know how to improve it. Here are a few tips on how to improve your credit score:
1. Register to vote – believe it or not, this can have a significant effect on your credit score. It helps potential lenders to confirm your name and address which will improve your credit rating. If you haven’t already, you can register to vote if you are a UK citizen and you're aged 16 or older on the Gov.uk website.
2. Don’t be late on your bills – if you have a mobile phone contract, broadband or anything else that requires monthly payments then make sure they’re paid in full and on time. Doing this consistently can prove that you are able to manage your finances effectively.
3. Check joint accounts – if you share an account with somebody who is irresponsible with their spending, there is a chance it could be affecting your credit rating.
4. Avoid unnecessary credit – only apply for credit when it is absolutely necessary to do so. You may be tempted to spend more than you can readily pay back.
5. Avoid having too many credit cards – it is true that you can use a credit card to help build your credit score. Just be aware that sometimes, applying for one may prompt a ‘hard check’ on your credit report which can temporarily affect your score until you can build it back up again. Also, if you’re getting a credit card, avoid going crazy with it at all costs! Just try to use it for only a few things every month (such as petrol) and make sure you can afford to pay it all back. If you don’t, your score will only plummet again.
6. Avoid changing address often – most lenders will consider how long you’ve lived at your address – and how many times you’ve moved – when offering you credit.
How long does it take to improve your Credit Score in the UK?
If you’re wondering how fast you can raise your credit score then you might be disappointed to hear that it won’t happen overnight.
Improvements to your credit score can take up to 3 months in the UK, as this is how long it takes for information regarding your repayment tendencies to filter through to credit reference agencies, so this is probably the very least amount of time you’ll be waiting to see a difference.
Why has my Credit Score gone down?
There are various reasons why your credit score may have taken a hit. These include:
1. Receiving a default notice – also known as going into arrears, this is when your lender comes to conclusion that you are not going to repay your debts so has ended the your agreement with them, ready to take further action. Avoid this at all costs.
2. Moving address regularly – as mentioned earlier, constantly moving address gives off the impression that you are in a relatively unstable position financially, which can affect your credit rating.
3. Closing an old account – particularly if this was an account that you have held for a long time, closing an account can lead to the average age of your total accounts to fall. It can also result in having less overall credit, pushing your credit usage up.
4. Applying for more credit – credit lenders will usually carry out a ‘hard search’ on your records, which can negatively affect your credit score. Applying for credit from numerous lenders at once may have an even greater impact on your rating.
5. Failing to make, or making late payments – probably the most common reason, regularly missing payments can be detrimental to your credit score. The later these payments are made, the more your score will be affected, so pay up ASAP – even if it’s late.