Ways to improve your credit score

Your credit score is very important. You may have just read What is a credit report?.

Now you know why it is important to monitor and improve it. But you might be wondering how to do that. Here are our top tips to increase your credit score.

How can I improve my credit score?

Register on the electoral role

This is one of the easiest steps you can take. If you are aged 18 or over, register on the electoral roll for your current home, even if you are living with parents. There are other reasons why you should do this too, such as being eligible to vote, so this is a great first step.

Check your credit report regularly

Your credit report includes a host of personal information. Any errors with this information could affect your credit score. Many free services are available to check yours.

Pay on time!

Just one missed payment can severely affect your score. A missed payment can stay on your record for 6 years. You should set up direct debits and reminders. Consistent on-time payments show lenders you are reliable.

Build your credit history

To get a good credit score, you’ll have to borrow money in some way or another. This may be in the form of car finance, credit cards, mobile phone contracts or purchasing household items on credit like a sofa.

It is recommended to have a mix of credit types. A combination of credit card, phone contract and small loan looks better than a single type.

Keep old accounts open

The longer your credit history, the better. It shows lenders you can manage multiple credit accounts.

Get a credit builder credit card

If you have a low credit score, having a credit builder credit card can help. Making regular purchases and making repayments on time can improve your credit score, like paying your phone bill or a small loan.

Things to avoid

Don't apply for too much credit at once

Regardless if they're successful, applying for too much credit can negatively impact your score. It can indicate that you are in debt. Space them out and only apply for new credit when you need it.

Don’t move home too frequently

Whilst moving home does not directly affect your credit score, it may indicate to lenders that you cannot afford to pay your rent and bills. When you move, it is important to update your personal details on your credit report.

Don't max out your credit

Using all of your allocated credit can show you as a risky borrower. It might be tempting to spend more than you should just because you can, but remember you will have to pay it back, with interest.

Using less than 50% of your allocated credit proves you are using it responsibly.

Over-the-limit spending

This means you have spent over 100% of the agreed credit limit. This is extremely bad for your credit score. Lenders may charge an over-limit fee, apply higher interest rates as well as reporting your account.

Payday loans

If you repay the loan on time and stick to the agreement, a payday loan is unlikely to affect your credit score. But, some mortgage providers may not lend to you if you have taken out this type of loan. These loans usually have a high interest rate. If you do not meet your repayment terms, the lender will charge you more in interest.

Joint credit with someone with poor credit.

When applying with someone else, the lender will research both parties. Even if you have good credit, if the other party does not, you could be subject to higher interest rates.

With joint credit, you will both be responsible for the debt and any missed payments will show on your individual credit reports. If the account is managed responsibly, where you meet your terms, you can help each other improve your credit score.

Be patient...Improving your credit score is often not a short term process. By taking steps to improve now, you’re likely to see the benefits by the time you apply for a mortgage.