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How to improve your credit score

How to improve your credit score

Category: Debt

Updated: 15/03/2016
First Published: 25/11/2015

With household budgets remaining tight, a lot of consumers are turning to credit to fund daily life. But before you'll be accepted for that loan, credit card or mortgage, lenders will rate your credit profile to see if you're a suitable candidate.

Having no credit history can be just as detrimental as having a less-than-perfect one, but there are ways to improve your credit score to boost your chances of being approved…

  • Make sure you're registered at your current address

A lot of lenders use the electoral roll for identity verification in order to combat identity fraud, so if you're not properly registered, it's highly likely that you'll be automatically rejected. This means you need to make sure you're registered with the electoral roll at your current address before you apply for credit.

  • Build up a credit history

Lenders will look at your previous credit information to decide if you'll be approved, but if you're making a particularly hefty credit request (such as applying for a mortgage), it becomes even more important. However, if you've never had a credit card, loan or overdraft, you won't have a credit history, and that could pose difficulties – how will lenders know whether or not you're a credit risk if they can't evaluate your past performance? So, if you want to get a mortgage or other large credit agreement, it's worth establishing a positive credit history by taking out a credit card or store card – just make sure to pay the balance off in full each month.

  • Make sure any CCJ settlements are recorded

If you've had a county court judgement (CCJ), it can be a serious black mark on your credit history, which means once it's settled you'll want to make sure your file records that settlement. If it hasn't, contact the court to get the necessary confirmation and then inform the credit agencies.

  • Keep balances as low as possible

Try not to continually have a balance on a credit card that's more than 30% of your limit – doing so could be an indication to lenders that you've already got too much credit and may not be able to keep up with additional repayments, which could lead to your application being rejected.

  • Close any account that isn't needed

Lenders are paying increasingly close attention to the amount of credit available to an individual, and if it seems you've already got access to a lot, they may be reluctant to offer you any more – even if you aren't using your credit accounts. That means any you don't use should be closed as soon as possible.

  • Stop applying!

If you've been refused credit by a particular company, don't keep applying elsewhere. Each credit search by a lender will leave a "footprint" on your file and too many in a short space of time could lead them to think that you're financially over-stretching yourself (or that you're desperate for money and may therefore be a credit risk), and that means they may not want to approve your application.

  • Contact the credit reference agency if you don't agree with anything on your file

If you've been refused credit, you'll want to get a copy of your credit report to check it over (it's often worth checking on a regular basis anyway), and if you don't agree with anything, make sure to contact the agency to put things right – updating your file with the correct information could help ensure you won't be refused credit in the future.

What next?

Check your credit and improve your credit rating

9 steps to score on your credit rating

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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