9 Ways To Significantly Improve Your Credit Score

How to improve your credit score

We’ve all heard of a credit score, but understanding how to improve your score can be a complex process. Many factors can affect your credit, from debts and credit accounts to missed payments and even address history. Therefore, it’s important to identify the factors that have the biggest impact on your personal credit report. 

We have put together a detailed step-by-step guide to uncover some of the most effective methods you can adopt to improve your credit score and build yourself a more stable financial future.

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Ways to improve your credit score

1. Close any unused accounts

It might seem like a large number of unused credit accounts should be a positive thing. On the surface, it paints you as a borrower with significant credit available but no need to make use of it all. However, lenders often only share this view when assessing a borrower with a small number of credit accounts. In fact, if you have a large number of unused accounts at your disposal, creditors and lenders often see a large amount of credit available as a risk factor. Put simply, your credit score could be impacted by your potential to take on a large amount of debt without the need to be subjected to further credit checks. 

By closing your unused accounts, you can focus on consistently paying off any debts held in your main credit accounts and prevent future lenders from seeing you as a high-risk prospect.

2. Reduce the amount of credit you use

Once you are focused on just one or two credit accounts, you may start to reap the rewards of having unused credit. Credit scores will often reflect the percentage of your available credit that has been utilised – aptly known as the credit utilisation percentage. Lenders will often view borrowers with a low percentage of credit utilisation as more reliable borrowers.

Experts often suggest that you should aim to use less than 30% of your credit limit to improve and then maintain your credit score. Try keeping your debt as low as possible over a long time will see the greatest impact on your score.

3. Stick to your repayment schedule every month

No matter what type of debt you have taken on, or the amount you have left to pay back, your credit score will be higher if you consistently meet your scheduled repayments. Missed payments and late payments will have the opposite effect on your score by suggesting that you are an unreliable borrower who may be a high risk for any future lender. It will take several months for consistent repayments to have a positive impact on your credit score. Still, it can significantly affect your financial future if you maintain the habit in the long term. 

An additional issue associated with missed or late payments is the penalty charge or late fee you will likely receive from your lender. This fee can significantly increase the amount of money you owe and will be included in your credit report, so even a single incident can impact your score.

4. Build your credit history

When we talk about a bad credit score, it’s easy to assume it can only result from a bad credit history. However, it is also possible to have a low score due to having very little credit history on your file. If you have never taken out any credit or signed up to any utilities that request a regular bill payment, it’s possible you may not have any information on your credit history at all. 

With no information to go on, credit reference agencies can deem you to be an unknown and may assign you a lower score as you have the potential to be a high-risk borrower. To prove this isn’t the case, you will need to build up your credit history, being careful to ensure you avoid adding any negative history to your report by accruing debt or missing bill payments. Common methods of building a credit history include opening a bank account, taking on and consistently paying household bills, and taking on an affordable credit card that you can repay in full every month. 

5. Register on the electoral roll

While your score is mainly based on your history of credit and debts, there are aspects of your personal information that can also impact how potential lenders see you. Reputable lenders will want to confirm your identity before they approve credit, and information, such as address history, can aid this process. By signing up to the electoral roll, you can provide lenders with a government-approved form of identification, confirming your current address. This will reduce your perceived risk and ultimately increase your credit score without requiring too much work or patience. 

6. Take out a credit card created for people with poor credit history

One way to improve your score is to fill your credit report with a history of consistent repayments. Unfortunately, if you already have a poor credit score, you could find it hard to find a lender willing to approve you for further credit, even if your financial situation has changed for the better. 

Thankfully, many lenders offer credit cards specifically designed for people with a poor credit history. While these cards often have higher interest rates, they can provide an effective means of demonstrating your new level of financial reliability so you can ultimately boost your score and gain approval for credit at a lower rate.

7. Avoid making multiple applications in a short time

If you have recently been rejected for credit, you may be tempted to submit another application to a lender that offers a higher chance of approval. However, every application you submit will require lenders to conduct a search on your credit report. Some lenders will soft search, which doesn’t impact your credit score, but some will hard search. This means a mark will be left in your history, and any rejections will impact your score. In addition, multiple applications – even those that are approved – will suggest to lenders that you are in desperate need of additional credit and will increase your perceived risk as a borrower.

8. Check for mistakes 

While many people choose to avoid their credit report, taking the time to read through it regularly will give you the chance to identify any errors. You are entitled to access your credit reports for free at any time so you can check for any mistakes made by lenders or credit agencies. These could include failure to remove a successfully disputed debt claim, false information regarding repayments, or even incorrect address information. To get started, contact one or more of the three UK credit bureaus to request access to your file.

9. Check for fraudulent activity

Identity fraud is not as uncommon as you might hope, and if you fall victim, you could find yourself with an unfairly low credit score as a result of someone else’s poor money management. The best way to tackle fraud is to deal with it as soon as it arises. Keep a close eye on your credit file and report any problems to the credit reference agency or lender immediately. However, you can also look back through your history at a later date and flag any fraudulent searches or credit accounts to the relevant body. 

Your questions, answered

To find out more about your credit score, you will need to access your personal credit file. In the UK, there are three credit bureaus, otherwise known as credit reference agencies. By contacting one or more of these agencies, you can find out how they have scored your credit file based on your financial history. As each of the credit bureaus is independent, they each hold a different report on your activity. This is because different lenders report to different bureaus, and some will only report to one. In addition, each bureau can use more than one model or algorithm to analyse your credit report and produce a score. As a result, your credit file and credit score are likely to be different, depending on where you search. 

When trying to find out your score, consider contacting more than one credit bureau so you can get a range of different scores based on your history. This will give you a clearer idea of where your score really lies when compared to others. Remember, each model will have its own scoring range so consult each one carefully to see where your score lies on each individual scale.

Due to the number of different bureaus that analyse credit scores, and the many different models each bureau uses to calculate a credit score, each person can have dozens of credit scores. Unfortunately, this can make it difficult to get a clear representation of your creditworthiness in the eyes of lenders. 

Although it isn’t necessary to find every score produced based on your credit report, gathering a large sample should give you a representative example of how your history is scored based on a range of models. By taking an average of these scores – and considering how your score is perceived based on each model’s scale – you can get a clearer idea of your overall credit score.

Many factors can contribute to a bad credit score, and the reasons can vary significantly from person to person. As your credit score is based almost entirely on your credit history, your score is determined by your past actions related to credit and debt. Some of the most common factors that result in a poor credit score include: 

  • Missing payments or making late payments: Missed payments and late payments often result in penalties and late fees. Not only do these fees increase your overall debt, but they are also marked in your credit history, so you will be considered a less reliable borrower by potential lenders. 
  • Having a large amount of credit available: It is beneficial to demonstrate that you are using only a small percentage of the credit available to you. However, having many unused accounts can make you a higher risk borrower in the eye of lenders. This is because you have access to large amounts of credit without the need to seek further approval, so you could take on a high level of debt very quickly. By closing these accounts and focusing on a small number of carefully managed credit accounts, you will appear both reliable and low risk to lenders. 
  • Frequent changes of address: While many of your personal details will not be included or considered within your credit history, your address is used to confirm your identity. Some lenders will also take a closer look at your address history to see where you have been living within the past three years and check you are a UK resident. If your history suggests that you move frequently, it can impact your credit score as it implies you lack stability.
  • Making multiple credit applications in a short space of time: If you apply for credit on multiple occasions within a short period, lenders are likely to consider you a high-risk borrower, and your credit score will rise. This is because frequent applications, particularly those that are rejected, suggest you are desperate for cash and are therefore unlikely to be able to meet your repayments.
  • Bankruptcy or court orders: If your debts have previously spiralled out of control, you may have found yourself dealing with bankruptcy or facing a court order. These legal processes can have a lasting impact on your credit history as they demonstrate a significant issue with money management. However, once the issue has been dealt with, it is possible to rebuild your history from scratch and begin improving your score.

While many different aspects of your finances and history will have an impact on your credit score, there are also large areas of your life that will be excluded. Some of the information that doesn’t affect your credit score includes:

  • Your marital status
  • Your medical history or details of current health conditions
  • Information on your shopping habits
  • Employment information, including details of your past and present income
  • Your education history
  • Your criminal record, excluding details of debt-related criminal activity
  • Your current bank balance.

The most important thing to remember is that all the information included in your credit history, aside from basic information that confirms your identity, is related to debts and credit. Anything that does not contribute to this aspect of your life will not be included and cannot be used to alter your credit score.

Yes. While it may not be as easy to borrow money when you have a low credit score, many people with a poor history still manage to secure the credit they need. Some credit cards, for example, have been specifically designed for people with a low credit score. Often, the lender will simply offer a higher rate of interest in exchange for approval. It is also possible to take out fast, short-term loans to help tide you over until after payday if you face unexpected bills. 

At The Money Shop, we aim to make loans available to people from all financial backgrounds. To find out whether you can borrow with our panel of lenders, use our eligibility checker. Our loan examples include details of the total amount you would owe, including interest, as well as details of the repayment schedule you will need to agree to if you succeed in applying for a loan. While lenders do have to complete a credit check, they will also consider other factors, so you have a greater chance of securing the emergency cash you need. If you think you might be ready to apply, click on the link below to start your online application.

If you’re worried about your credit score or feel you need more information about lending options, take a look through our collection of in-depth guides. Each guide has been created to provide you with clear, detailed information about common lending problems and popular loan options so you can move forward with your lending journey with confidence.