How to improve your credit score

Are you thinking about applying for credit? If so, you need to make sure your credit score is in check – and if it needs work you need to look for ways for it to be improved. But before you can do that, you may want to learn about the different credit reference agencies, what information they examine and what they can deem as a good or bad credit score. Our helpful guide to credit checks explains everything you need to know.

It's important to check your latest credit score before deciding how to make improvements. Make sure that all the information on the report is accurate, and get it corrected by contacting the lender or credit reference agency if it isn't. TotallyMoney can provide you with a credit score and report, for free, forever. Use them to track your finances and to find lenders most likely to accept you for credit.

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Once you’ve got an idea of how credit scores work, it’s time to get into the nitty-gritty of your own credit history. Lenders will rate your credit profile to see if you're a suitable candidate before you'll be accepted for a loan, credit card or mortgage, and having no credit history at all can be just as detrimental as having a less-than-perfect one. But, there are ways you can improve your credit score to boost your chances of being approved: 

A lot of lenders use the electoral roll for identity verification in order to combat identity fraud, so if you're not registered to vote at your current address this could cause problems. Make sure you're registered with the electoral roll at the correct address before you even think about applying for credit. Living at the same address, being employed in the same job (with the same employer) and having the same bank account for a reasonable period will also help boost your creditworthiness.

Lenders will look at your previous credit information to decide if you're a suitable candidate, and your history becomes even more important if you're making a particularly hefty request (such as applying for a mortgage).

But, 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 you're a credit risk if they can't evaluate your past performance? That means, if you want to secure that credit agreement, it's worth establishing a positive credit history by taking out a credit card first and making a few small purchases each month. Doing so can prove your money management skills and can be a great way to build up your score, but of course, you'll need to pay off the balance on that card in full each month. 

When you take out a joint mortgage or bank account, you become "financially linked" to that person. If they have a bad credit rating, it could impact yours.

So, for those who have split up with their significant other and have fully paid off their joint financial product (like a mortgage),it is best to inform the credit reference agencies of your disassociation. If not, the other person's financial dealings could still have an impact on your credit score.

Try not to have credit card balances that are more than 30% of your limit – doing so could be an indication to lenders that you already use too much credit and may not be able to keep up with additional repayments, which could lead to your application being rejected. As a rule of thumb, keep balances as low as possible, while still using a bit of your limit to prove your creditworthiness.

Missed and late payments can stay on your credit file for up to six years. If you've made a late payment due to circumstances beyond your control (i.e. your direct debit wasn't set up in time), so long as you made the payment promptly when you noticed, talk to your credit provider and see if you can get this black mark removed. This also applies to late payments for utility bills like gas or electricity.

By this we mean pay off more than just the minimum payment each month. This signifies good behaviour to a prospective lender. To be managing your debt well, ensure that you're making headway into repaying what you've borrowed.

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 might be reluctant to offer you any more. That means any accounts you don't use or need should be closed as soon as possible by, for example, cancelling a credit card that you've paid off and will no longer be using (cutting up a card isn’t enough – you need to contact the provider and officially cancel your agreement). This applies to things like unused mobile contracts and store cards too, so be prepared to go through your finances to check for anything you’ve overlooked.

If you've been refused credit by a lender, don't keep applying elsewhere. Each credit search will leave a "footprint" on your file and too many in a short space of time could indicate that you're desperate for money and could be a credit risk. Ideally, try to find out whether you're likely to be accepted before applying, and don’t apply for products unless you really need them.

Credit builder prepaid cards can help you improve your credit rating. They charge a monthly fee which is in the form of a small loan and you'll need to keep paying for 12 months. At the end they will add an entry to your credit file that you have successfully repaid the debt. A prepaid card doesn't require a credit reference as you are not borrowing any money. 

It's a good idea to regularly check your credit score to make sure everything is as it should be, particularly if you're thinking of applying for a mortgage (or other large credit agreement) in the near future. It'll also highlight any discrepancies, and if you don't agree with anything on your file, contact the credit reference agency – updating your file with the correct information could help ensure you won't be refused credit in the future.

It may sound strange, but there are ways you can improve your credit score using a savings account. 

In recent years, accounts have been developed that are specifically designed to help you build your credit profile, and they work by using a loan-based system. Essentially, when you decide you want to start, think about how much you can afford to save over the next year. The provider will then lock this amount away in a ring-fenced 0% APR loan, which you have to “pay off” over the year by depositing your savings. At the end of the year, the loan will be paid off and you get your savings back, and your credit score will have received a handy boost in the process. LOQBOX is a prime example of this kind of system, offering a way to improve your credit score without the risk getting into of unmanageable debt. This means that anyone can take out a LOQBOX no matter your credit score when you start.