Ten easy and free ways to improve your credit score

Friday, April 3, 2020

 What is a credit score?

Your credit score is an assessment by a particular lender of how much of a credit risk you are. Credit scores are used by banks and lenders to determine whether they will lend to you and at what interest rate.

How do I check my credit score?

There are three main credit scoring agencies in the UK: Equifax, Experian, TransUnion.

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.

Ten Top Tips to improve your credit score:

1. 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.

2. 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.

Find out more on correcting personal information on your file on the Information Commissioner’s Office website

3. Pay your bills on time:

Paying on time is a great way to prove to lenders that you’re capable of managing finances effectively.

4. Don't let your partner or flatmate's score wreck yours!

If you are financially linked to someone on any product, that means their files can be accessed and looked at as part of assessing whether to accept you. 

There are currently only four products that can infer financial linking – a joint mortgage, a joint loan, a joint bank account (not savings as they don't go on credit files), and in certain circumstances, your utility bills. Being jointly named on a bill with a flatmate shouldn't mean you are financially linked – this should only happen when the energy firm is confident you're a couple (eg, when your bills are addressed "Mr and Mrs").It's worth noting that while many people think they have a "joint" credit card, these technically don't exist. It's one person's account, the other just has a second card to access it.

5. Check for fraudulent activity:

If something on your credit report is incorrect or doesn’t apply to you, i.e. if someone applied for credit in your name without your knowledge, contact the credit reference agency immediately to have your file updated. Steps to take to improve your credit score if you’ve been a victim of credit fraud

6. 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, find free debt advice online.

7. 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.

8. Moving Home

Lenders feel more comfortable if they see evidence that you have lived at one address for a considerable period. Check addresses on old accounts. Check your file and go through every active account's address to ensure it is up to date

9. Avoid expensive credit repair companies

You might see adverts from firms that claim to repair your credit rating. Most simply advise you on how to obtain your credit file and improve your credit rating - but you don’t need to pay for that, you can do it yourself. Some might claim that they can do things that - legally - they can’t, or even encourage you to lie to the credit reference agencies. Don’t even consider using these firms.

10. 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.