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February 14, 2020

Climbing Mt. Credit: How to Improve Credit Score UK

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If you’re wondering how to improve your credit score UK, then you’ve come to the right place.

Building a good credit score, also known as a credit rating, is crucial because it can affect your ability to borrow money or access products such as credit cards or loans. You can check your score for free and if it isn’t in the best shape, there are things you can do to improve it.

How do I check my Credit Score?

There are three main Credit Referencing Agencies (CRAs) in the UK: Equifax, Experian, TransUnion. These CRAs are the companies that create, and keep hold of your credit reports. They gather information about your credit history and collates it into a credit report, as well as calculate a credit score for you based on this information

You can request full details of your credit file for free or simply get your score online, which is also free. The main difference between the full credit file and online versions are that the credit file versions let you have a paper copy sent to your address, while the other is only available online.

Credit Score Membership

A subscription membership with one of the main credit agencies might allow you to gain more up-to-date information on your credit history. Some of the memberships might also give you access to credit agents who can look into your file.

If you’re on a free-trial, set up a reminder to cancel your membership if you don’t want to pay the monthly subscription once the free-trial period ends.

Full Statutory Credit Report

You have the legal right to see a copy of your credit report for free.

You can request this from any Credit Reference Agency that holds information about you.

What Information is in a Credit Report?

Each agency holds slightly different information about you, so it’s worth checking multiple agencies for a more accurate picture.

In general, your file will include:

  • Name, Address, and Date of Birth.
  • Some search footprints on your file, such as Credit Applications.
  • Financial links to other people. For example, a joint loan or bank account.
  • Any late or missed payments, or defaults.
  • Money you currently owe to lenders.
  • Any County Court Judgments (CCJs) against you that are not paid in full within one month of receiving notice.
  • If you’re on the Electoral Roll/Register at your current address.
  • If you have been declared bankrupt or entered an IVA (Individual Voluntary Arrangement).

It won’t include the following information:

  • Your salary.
  • Student loans.
  • Medical history.
  • Criminal record.
  • Council Tax arrears
  • Parking or driving fines.

However, you might be asked for this information when applying for a loan or contract. Then, they might then choose to use this information alongside your credit report to assess your creditworthiness.

 

What is a Good Credit Score?

Different lenders have their own standards for rating credit scores. If you have a good score with one of the main credit reporting agencies, it’s likely that you’ll have a good credit score with your lender.

A good credit score with:

  • TransUnion is scoring 4 out of 5
  • Equifax is scoring over 420 out of 700
  • Experian is scoring over 880 out of 999

But remember, your credit score doesn’t guarantee that you’ll be approved for credit or offered the lowest interest rates. This is because a lender’s decision is not made solely on credit score.

How long will it take to Improve My Credit Score UK?

In general, credit history is built up slowly over time as you increase the number of on-time payments you make.

The longer the bill goes unpaid, the greater the impact on your credit score. Keep a close eye on your credit score to help spot issues.The most negative marks will remain on your file for at least six years. After that time, everything is deleted from your file, including missed payments, defaults, bankruptcy, and CCJs.

There are some quick improvements in this next section that you can make to begin raising your credit rating.

How can I Improve my Credit Rating and Credit Score?

If you have a low credit rating, there are several things you can do to start improving your score today:

  • Register on the Electoral Roll

If your name’s not on there, you’ll find it much harder to get credit. You can register to vote online or by post.

  • Check for Mistakes on Your File

Even having just a slightly wrong address can have an impact on your score. So, make sure you check all the details and report any incorrect information immediately.

  • Pay your Bills on Time

Paying phone, landline, or internet contracts on time is a great way to prove to lenders that you’re capable of managing finances effectively.

  • Check if you’re Financially-Linked to Another Person

Having a spouse, friend or family member’s credit rating linked to yours through a joint account could affect your personal rating if they have a poor score.

  • Check for Fraudulent Activity

If something on your credit report is incorrect or doesn’t apply to you, for instance, if someone applied for credit in your name without your knowledge, contact the credit reference agency immediately to have your file updated.

  • County Court Judgements (CCJs)

Receiving any court judgements for debt will have a serious impact on your credit score. If you’re having problems keeping up with payments, look for ‘free’ debt advice or consultations online.

  • High Levels of Existing Debt

Ideally you should eliminate any outstanding debt before applying for new credit. This is because banks, building societies, and credit card companies might be hesitant about lending you more if you already have a lot of existing debt.

  • Avoid Shifting Houses

Lenders feel more comfortable if they see evidence that you have lived at one address for a considerable period. Be sure to bear this in mind as it is crucial for loan-eligibility.

  • Keep your Credit Utilisation Low

Your credit utilisation is how much of your available credit limit you use. For example, if you have a credit limit of £2,000 and you’ve used £1,000 of that, your credit utilisation is 50%, so you’re using half of your credit limit. Usually, using less of your available credit will be seen positively by lenders, and will increase your credit score as a result.

If possible, try and keep your credit utilisation at 25% or lower.

If you’re struggling to improve your score, it might be worth considering signing up to a one-month free trial membership offered by the main credit agencies.

Consider Getting a Credit-Building Card

If you have a poor credit history, you might want to consider a ‘credit-builder’ credit card.

These are cards designed for people with little to no credit history or those who have a bad credit history. The credit limits are often low and the interest rates high. This reflects the level of trust your credit file gives lenders.

By using these cards and paying off the bills promptly each month, you can prove you’re creditworthy, increase your credit score, and apply for other cards and loans when your credit rating improves. The interest rates charged are much higher than standard credit cards though, so be sure to bear that in mind. Typically, you’ll be paying over 30% in interest a year, which is another reason to try to pay off any balance in full each month. Otherwise, you might end up in debt that you struggle to get out of which could harm your credit rating even further.

You should use credit builder loans for the sole purpose of building credit. Consider taking the smallest loans possible and clear them off quickly to boost your credit rating.

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