5 top tips to improve your credit score

Credit is borrowed money you can use to purchase products when you need them. You get credit from a credit provider, such as a bank, credit card company or a specialist provider like Moneybarn, with whom you agree to pay back the amount borrowed, plus interest, over an agreed period of time in set instalments.

Your credit score is a key indicator of your financial health. It’s a 3-digit number which helps lenders decide whether to approve your application or not.

Having a good credit rating is crucial if you ever want to apply for things such as; a mortgage, car finance, a mobile phone contract or a credit card.

How is your credit score calculated? 

When a credit reference agency calculates your credit score, it takes into account all the relevant information it holds about you. This includes considering the amount of credit you already have, your payment history and your used credit vs your available credit.

The agency calculates the score and makes it available to the lender who then determines if they will accept your credit application.

Why you should focus on improving your score 

Taking the time to improve your credit rating is something everyone should do.

There are some simple techniques you can use to improve your credit score and it’s also important to focus on building up a good credit score over time so if something unexpected happens, your credit rating doesn’t take a major hit.

Here are five simple ways to improve your credit score:

1. Update your information

Make sure you update your address, contact details, work status, or any other information with all of your credit providers. Any wrong information appearing against your name might affect your credit rating or delay a credit application from being approved.

In particular, make sure the electoral roll has your correct address. Lenders will normally search the electoral roll any time you make an application for credit as it helps them comply with fraud regulations.

2. Start to build a history

Lenders like to see prior borrowing history. Taking out smaller forms of credit like a mobile phone contract or store card and managing them well, will demonstrate you can pay bills responsibly and on time each month.

This can increase your chances of being accepted for other forms of credit. However, you need to be careful not to make several credit applications within a short period of time. Any application you make leaves a footprint on your report and lots of applications close together can have a negative impact on your credit score.

3. Take care of existing debt

Ideally, you should try to clear any outstanding debt before you apply for new credit. Credit providers will likely be hesitant to approve your application if you already have a lot of existing debt.

Be sure not to miss payments as this can negatively affect your credit score and stay on your report for a number of years. If you’ve made late payments or missed them altogether, in the lenders eyes this suggests you’re unable to make stable and regular payments.

It can also affect your original contract with a lender. If you have a 0% balance or purchase deal, don’t let that fool you into missing a payment, as it can invalidate the promotional rate, meaning you’ll then start paying interest on the balance.

However, don’t worry too much if you have late or missed payments that are over 12 months old because they’re viewed less seriously by lenders if you’ve shown you can make payments regularly more recently.

4. Don’t let a partner or flatmate’s score affect yours

You may not be aware that if you’re financially linked with someone, their credit rating can be looked at by lenders when assessing whether to accept your credit application. Even joint utility bills you cover with a flatmate could mean you are co-scored.

If you’re aware a partner or flatmate has a poor credit history, it can be a good idea to try to keep your finances separate, so you can build and protect your own credit rating.

5, Close any unused credit account

As well as considering your total existing debt, lenders may look at the amount of credit you have access to. This means it’s a good idea to close any credit accounts you don’t use or need anymore.

Final note

While a credit score can be improved with simple techniques, like those above, it is more effective to build up a good credit score over time.

Use our top tips as a guide, to start improving your credit score and you’ll be able to identify individual factors affecting your progress and nip them in the bud – remember slow and steady wins the race.