GET A BETTER CREDIT SCORE
1. Check your credit report and correct mistakes
These days, it’s worth checking your credit report at least once a month to make sure that the information it contains is correct and up to date.
With the rise in identity theft and fraud, it’s a good idea to keep a frequent watch on the information being recorded in your credit report.
You should check the information each of the three main credit reference agencies (Equifax, Experian and TransUnion) have about you. You have the right to get your statutory credit report for free from these firms.
If you notice any mistakes, it's important to get them rectified as soon as possible to ensure they aren’t dragging down your credit score unnecessarily and won’t have any adverse effect on future credit applications.
You can do this by contacting the company that provided the incorrect information or the credit reference agency itself, which will investigate on your behalf.
How long will it take to correct mistakes on your credit report?
Find out more: is a credit report error wrecking your score?
2. Register to vote
If you're not on the electoral roll, you could find it very difficult to get credit.
The electoral roll is used to confirm that you live at the address given in your application - a key part of the identity checks that lenders have to carry out.
Experian, the largest credit reference agency in the UK, says registering to vote can boost your score by as much as 50 points.
You can register to vote online at any time through the register to vote website - it only takes five minutes.
If you can’t register to vote, your applications may take longer to process and could even be rejected. However, you can add a note to your report explaining why you can’t register to vote to help avoid the delays.
How long will registering on the electoral roll take to boost your score?
3. Make your rent payments count
Tenants sometimes pay out much more in monthly rental payments than homeowners yet still find it difficult to prove they could borrow and afford to repay loans such as a mortgage.
But now private, council and social housing tenants can get this record of making regular payments onto their credit report and improve their credit score via a rent reporting platform.
Council or social housing tenants should ask their landlord to report the rental payments they make to a free scheme called The Rental Exchange and information will appear on their Experian credit report.
Tenants renting through a private landlord or letting agent can also ask them to report rental payments to The Rental Exchange or they can choose to self-report via CreditLadder or Canopy.
CreditLadder is the only service that reports rent payments to all three credit agencies (Equifax, Experian and TransUnion), but this service cost £5 a month. However, you can access the service for free if you opt to report to just one agency.
Canopy offers a similar service called RentTracking, and it will report payments to Experian for free and to both Experian and Equifax for a charge of £4.99 a month.
CreditLadder and Canopy use open banking, which allows them to track the rental payments being made each month through your current account - with your permission.
If you make your rental payments on time, getting your rent on your credit report is likely to boost your credit score.
How long will rent reporting take to boost your score?
4. Use Experian Boost to report council tax and Netflix subscriptions
In November 2020, Experian launched a new tool to help people quickly improve their credit scores.
Experian Boost uses open banking to allow you to grant Experian access to your current account information.
The tool allows you to unlock previously hidden information on your salary, council tax payments, savings habits and even your subscription payment information.
Experian says that 17 million people could boost their credit scores by up to 66 points by using the tool.
Find out more: Experian Boost explained
5. Use 'soft searches' for new credit
When you apply for credit a lender will perform a ‘hard credit search’ to check if you are eligible. This will leave a 'footprint' on your credit file, which will be visible to other lenders.
So it's worth asking lenders to perform a ‘soft search' rather than a hard credit search when you're looking to get new credit. This should give you an idea of whether your application would be accepted, as well as what interest rate you'd be charged, but won't be visible to other lenders on your credit report.
More and more lenders are offering soft searches, including on loans, credit cards and mortgages.
How long will this take to boost my score?
6. Avoid multiple applications
If you've recently been turned down for credit, it's unwise to apply for another credit card or loan immediately, as multiple applications over a short period of time may suggest to lenders that you're in financial difficulty.
Experian says not opening an account for six months can boost your credit score by 50 points.
Spread out loan and credit card applications by at least three if not 12 months. Each application, whether successful or not, shows for 12 months, but generally only has an impact in the first three months.
7. Keep your credit usage low
Lenders will look not only at your outstanding balances, but at how much credit you have available in their assessment of your risk.
If you have low available credit, prospective lenders may see this as a sign that you’re not successfully managing your finances.
Experian says that borrowing more than 90% of the limit on a credit card can knock 50 points off your Experian credit score. Meanwhile, keeping your balance below 30% of the limit will boost it by 90 points. Keeping your credit card balance below £50 can give you a boost of 60 points.
How long will this take to boost my score?
8. End financial associations with ex-partners
Living with or being married to someone who has a bad credit rating won't affect yours, but taking out a joint financial product with them will.
Opening a joint current account, for example, will create a 'financial association' between you and the other account holder.
Lenders may look at their credit report as well as yours when assessing your application, as their circumstances could affect your ability to make repayments.
If you have ever jointly held a financial product with someone you no longer have a relationship with, ask all three credit reference agencies to break this link so that your ex-partner's financial situation doesn't have an impact on any credit applications you may make in the future.
How long will this take to boost my score?
9. Avoid CCJs and bankruptcy
Being declared bankrupt, entering into an Individual Voluntary Arrangement (IVA) or having a County Court Judgement (CCJ) made against you will badly affect your creditworthiness.
According to Experian, receiving a CCJ will knock 250 points off your score, and defaulting on an account will mean a 350-point reduction.
So it's worth checking if there are any alternatives to these routes if you are in financial difficulty.
Usually, it takes six years for individual voluntary arrangements or court judgments to disappear from your credit report. At that point, you should see an immediate change in your score.
Find out more: how to pay off your debts
10. Pay more than the minimum
Making just the minimum repayment on your credit card each month may lead lenders to assume you're struggling to clear your debts.
Instead, try paying more than the minimum or the full amount each month to help you clear debt faster.
11. Never miss a repayment
Showing that you can repay on time and stay within the credit limit you've been given will help convince lenders you're a responsible borrower.
Inform your lenders as soon as possible if your debts are proving too difficult to handle. It’s better to seek their help than to repeatedly miss loan or credit card repayments with no explanation.
If you are late with a payment or miss one, it will show up on your report within a month. One late payment on a credit card or loan can dent your score by as much as 130 points, according to Experian.
A missed payment will show on your report for six years, although its effect will lessen. If you’ve missed only one payment, your score could start to recover after around six months and should be fully recovered after a year.
12. Use a credit builder credit card
If you've never borrowed money before, you might assume this means you have a good credit score. In fact, this is unlikely to be true.
That's because when assessing your application, lenders look for evidence that you'll be able to pay back what you borrow, so having no record of successful repayments can count against you.
Experian estimates 5.8 million people have a ‘thin file' in the UK. This means that credit reference agencies don’t hold any information on you which makes you invisible to the financial system. This can lead to not being able to access products such as a mortgage, loan or credit card, or facing higher costs than others.
Consequently, you may find that you're turned down for credit cards and loans – especially those on the cheapest rates - even if you could comfortably afford to pay them back.
One solution is to take out a credit card specifically designed to help you build - or rebuild - your credit history.
However, as these 'credit builder' cards are aimed at higher-risk customers, APRs tend to be very high, so you should never use them to borrow.
How long will this take to boost my score?
13. Get your name on some bills
According to Credit Karma (which is powered by TransUnion data), the ‘gender credit score gap’ is caused by women not having financial products in their own name.
The research found that 31% of women have some or all of their financial agreements in their partner’s name and were less likely to have credit cards, mortgages and personal loans.
If you don’t have loans or credit cards, putting things like a mobile phone and utility bill in your name will help build your score.
How fast can you raise your credit score?
Improving your credit score is a marathon, not a sprint.
Some actions may make a swift change, but credit scores are determined by a combination of factors, so you may have to address a number of issues over some time
