How to improve your credit score

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How to improve your credit score

If you have a low credit score, you may find it hard to get accepted for a credit card or even a mobile phone contract. You may also be offered a less competitive rate on cards, loans and mortgages than someone with an excellent credit history.

The good news is, there are lots of simple steps you can take to bolster your rating.

What is a good credit score?

You can find out your credit score by contacting a credit reference agency such as TransUnion Experian, or Equifax.

Each has its own scoring system, based on the information it holds. TransUnion rates on a scale from 0-710, Experian from 0-999 and Equifax from 0-1,000.

While each system differs, with all three, the higher your score, the better your rating.

Why is a good credit score important?

A credit score indicates how a lender will view an individual's ability to repay debt. If you have a low score lenders see you as a higher risk and less likely to keep on top of repayments. As a result, less competitive rates and lower limits may be offered. If a credit score is particularly poor, there’s a risk you may get rejected.

Those with a higher score will generally be able to access a wider choice of credit products, along with better rates and higher credit limits. Being eligible for the best deals could save you money in the long run.

What steps can I take to improve my rating?

There are lots of simple actions you can take to boost your score. Some will have a quick positive impact, others will help build your rating over time.

  • Check for errors

    Get hold of a copy of your credit report and make sure the information held on it is accurate and up-to-date. If you find any mistakes, get these corrected. You can ‘raise a dispute’ on an item you believe to be wrong.

  • Get registered on the electoral roll

    Both lenders and credit reference agencies use this to check your name and identity, and that you live where you say you do and being on the electoral roll can boost your credit score.

  • Cut your debts

    Reduce the amount you owe on debts such as credit cards. This shows that you are able to manage your finances responsibly and most lenders will suggest a credit utilisation of about 25%.

    Taking advantage of a balance transfer card could be helpful as you only make repayments towards your debt, not towards paying interest – helping reduce what you owe more quickly.

    Remember that with balance transfer cards you need to make sure you make your repayments on time, repay in full within the offer period and don’t use it for making purchases.

  • Consider a ‘credit builder’ card

    Rates are typically higher than on standard cards – and credit limits may be lower – but the key is to show that you can use your plastic responsibly. This means staying within your credit limit and making all repayments on time.

    By demonstrating that you are reliable, lenders are likely to look upon you more favourably in the future.

  • Make your rent payments count

    There are now schemes which send records of a tenant’s rental payments to credit reference agencies. So, if you make your payments on time, your credit file can be updated accordingly with this information.

  • End ties with ex-partners

    If your credit report links you to an ex-partner or old flat-mate – perhaps via a joint bank account or by being named jointly on household bills – that individual’s credit rating could harm your score. If you are no longer connected, request for a ‘notice of disassociation’ to be put on your record.

  • Close unused accounts

    Shut down accounts that you are no longer using – or which have been unused for a long time.

Tips to avoid damaging your credit score:

Avoid CCJs

Be aware that a County Court Judgement (CCJ) will stay on your credit report for six years. As this can put a big dent in your credit score, take care to only borrow what you can afford.

Never miss a repayment

Missed payments can have a big impact on your credit score, and could also leave a mark on your file for up to six years. Always try to pay your bills and credit commitments on time. Make things easier by setting up direct debits.

Pay more than the minimum each month

Try and clear your credit card balance in full if you can. This will help demonstrate that you are not reliant on borrowing. It will also help you clear your debt faster.

Avoid making multiple applications

Take care not to take a ‘scattergun’ approach to applying for credit. If you make a lot of applications in a short space of time, a lender could view you as desperate for credit, and may turn you down.

Avoid hard searches

When applying for credit, use an eligibility checker tool, as this will enable you to carry out a ‘soft search’. This will give you an indication of your chance of being accepted without leaving any ‘marks’ on your credit file – improving your chances of making a successful application.

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Use your card sensibly — if you don’t make repayments on time or stay within your credit limit you will pay extra charges, forfeit the 0% offer and getting credit in the future may be harder and more expensive.

Credit is available, subject to status, only to UK residents aged 18 or over.

NewDay Ltd provides our credit here at Fluid. TM Connect Limited promotes the Fluid card exclusively with NewDay Ltd and acts solely as a credit broker. Fluid is a registered trade mark of TM Connect Limited, which is used under licence by NewDay Ltd.

NewDay Ltd and NewDay Cards Ltd are companies registered in England and Wales with registered numbers 7297722 and 4134880 respectively. They form part of the NewDay group of companies. The registered office for these companies is 7 Handyside Street, London, N1C 4DA. NewDay Ltd and NewDay Cards Ltd are authorised and regulated by the Financial Conduct Authority (FCA) with numbers 690292 and 682417 respectively. NewDay Ltd is also authorised by the FCA under the Payment Services Regulations 2017 (ref no: 555318) for the provision of payment services.

TM Connect Limited is registered in England and Wales (Company Registration Number 06967012) and authorised and regulated by the Financial Conduct Authority in respect of consumer credit related activities (FCA FRN: 511936). Trading Address and Registered Office: Chapter House, 16 Brunswick Place, London N1 6DZ. TM Connect Limited is a credit broker and not a lender.