How Can I Improve My Credit Score?

A poor credit score can affect your life in several ways. You may find it more difficult – and/or more expensive – to get a mortgage, buy a car or even take out a mobile phone contract. Cleaning up your credit history and boosting your score can get you closer to your financial goals. We’ve put together a step-by-step guide to doing just that.

 

Step 1 – check your credit history is accurate

Your credit history goes back 72 months (six years), and it records every time you make a repayment on time – or every time you don’t. It updates every month, so each month some information drops off and new information is added.

It is your credit history that lenders’ check when you apply for credit. Your credit score, or credit rating, is a number that the three credit reference agencies calculate to help explain how your credit history will look to lenders.

You can check your credit history for free for free at the following links:

• Equifax via Clearscore
• Experian
• TransUnion (which was CallCredit) via Credit Karma

Checking your report has no effect on your credit score.

It is a good idea to check all three credit reference agencies to ensure that the details they hold are correct. They may not all hold the same information about you. If some details are wrong, you can contact the agencies to get them corrected. For example, if your credit report states that you have a ‘financial association’ with someone you’re no longer linked to, you can submit a ‘notice of disassociation’. You can find details of how to make these corrections on the credit reference agencies’ websites.

Step 2 – deal with your debts

People sometimes tell us that they’re worried that beginning a debt solution [link to debt solutions page] will have a negative impact on their credit score. And it’s true, to some extent. Insolvency solutions will all be recorded on your credit report for at least six years from the start of the solution. These include bankruptcy, Debt Relief Orders (DROs) and Individual Voluntary Arrangements (IVAs).

Debt Management Plans aren’t recorded on your credit report as such. However, you won’t be repaying your debts as you originally agreed with the lender; and they’re likely to send you notices of default. So this will have a negative effect on your credit score too: defaults will be recorded on your credit report for six years.

But let’s look at the big picture. Are you’re struggling to keep up with your financial commitments? Maybe you’re missing payments on loans or credit cards, or even your everyday bills. This will damage your credit score, not to mention your peace of mind. If your lenders issue defaults or even County Court Judgments (CCJs) against you, these will be recorded on your credit report. What’s more, struggling with money worries can have an impact on your mental health, your relationships and other areas of your life.

We think that’s why our customers say the impact of a debt solution on their credit score is worth it in the long run. There are different solutions available to help you tackle your debts. Take a look at our debt solutions [link] page to find out more.

Step 3 – rebuild

Once your debts are sorted, you’ll have an opportunity to start rebuilding your credit history. What’s more, you’re likely to have developed your budgeting skills during your debt solution. That means your credit report will begin to show that you’re managing your bank account responsibly. And even more importantly, all your essential payments will be made on time.

You can also boost your credit score by doing a few basic things: registering to vote, making sure that your bank accounts and so on are all registered at your current address. You can also try some or all of the tips below…

Rebuild by paying bills on time

Prioritise paying all your bills in full and on time. This will show potential lenders that they can trust you with their money.

If you’re renting your home, you may be able to boost your credit score simply by paying your rent. This may be an option for both private tenants and social tenants. Schemes you can use to do this include The Rental Exchange and CreditLadder. Sign up to one of these and make your full rent payments on time every week or month as usual. These rental payments will then be reflected in your credit score.

Some utilities providers also pass on information to the credit reference agencies. Ask your providers if they do this. If they do, the credit reference agencies will know whether and when you make your payments. This will help rebuild your credit score if you stay up to date.

But remember, this works both ways! Any missed or incomplete payments will have a negative impact on your credit score.

Rebuild by saving

LOQBOX is a kind of regular savings account. LOQBOX treats the payments you make into the account as repayments on a loan. They then report these payments to the credit reference agencies. LOQBOX say that making your agreed payment in full and on time each month should start to boost your credit score after around four months.

Rebuild by borrowing – carefully!

If you’re confident in your ability to manage credit carefully without getting into difficulties again, you could consider taking out a credit card (but only once you have completed your debt solution). A credit builder credit card, for example, could help rebuild your credit score as long as you:

• keep the balance low (less than half of the credit limit)
• pay the full balance each month, so you never have to pay the interest. Credit builder cards tend to come with a high interest rate
• remember to pay on time. As with any credit card, you will damage your credit score if you don’t manage to make at least the minimum payment by the due date.

Don’t forget that your credit report includes a record of all your applications for credit. So if you try to take out a credit card and you’re turned down, this could suggest to lenders that you’re struggling financially, which will make them less likely to want to lend to you. The same applies if you make a lot of credit applications very quickly. So, apply for credit sensibly. Do your research and try to only apply for cards and loans for which you stand a reasonable chance of being accepted.

No matter how bad things seem, there’s a way you can turn it around. Check out our debt solutions page to find out how you can start dealing with your debts, rebuilding your credit score, and getting on with your life.