Advice and Tips

How to improve your credit score

Hannah Scott, Senior Credit Risk Manager, Wednesday, 23 February 2022
Updated: Thursday, 18 August 2022

Your credit score is generated from your credit file. This is an important list of your financial history that will be looked into if you ever need to apply for finance. It essentially includes every credit card account you have opened and any loans or finance you have taken out including finance on household items like a sofa. It will also show if you have paid your bills on time of even missed a payment.

If you’re unsure you can take a look at what is meant by a good or a bad credit score, but even if you have a good credit score, it’s always worthwhile improving it where you can. 

Your credit score is generated from your credit file. This is an important list of your financial history that will be looked into if you ever need to apply for finance. It essentially includes every credit card account you have opened and any loans or finance you have taken out including finance on household items like a sofa. It will also show if you have paid your bills on time of even missed a payment.

If you’re unsure you can take a look at what is meant by a good or a bad credit score, but even if you have a good credit score, it’s always worthwhile improving it where you can. 

Tips to improve your credit score

Your credit score can be affected by a lot of things, but there is also a lot you can do to increase your chances of getting finance, and improving your credit score is high on that list.

IVA’s and CCJ‘s will remain on your credit file for up to 6 years which will affect your credit score. However, don’t be disheartened there is still lots of things you can do to improve it… Every little helps with your credit score, and this could mean the difference between a few percent on your loan’s APR which could save you a lot of money in the long run.

Lenders use your credit file, and the information within it, to assess your ability to pay back any credit you may want to take out. If your credit score is bad then you will be seen as a higher risk in the eyes of the lender and this could then stop them from accepting an application.

But the real question is, how to improve your credit score? 

Tips to improve your credit score

Your credit score can be affected by a lot of things, but there is also a lot you can do to increase your chances of getting finance, and improving your credit score is high on that list.

IVA’s and CCJ‘s will remain on your credit file for up to 6 years which will affect your credit score. However, don’t be disheartened there is still lots of things you can do to improve it… Every little helps with your credit score, and this could mean the difference between a few percent on your loan’s APR which could save you a lot of money in the long run.

Lenders use your credit file, and the information within it, to assess your ability to pay back any credit you may want to take out. If your credit score is bad then you will be seen as a higher risk in the eyes of the lender and this could then stop them from accepting an application.

But the real question is, how to improve your credit score? 

1. Register for the electoral roll

Making sure you are on the electoral roll is an easy fix, but can really make a difference to your credit score. Our advice would be that if you aren’t on it, then make sure you are. 

The reason why this can make such a difference to your score is simple. When you register for the electoral roll you have to give information about yourself like your name and address. This information can help lenders confirm that you are who you say you are and this can increase your credit score. 

It could also save you time on credit applications. Lenders may not need to ask for as much documentation to prove your identity as they’ll have the electoral roll for some of this information. 

1. Register for the electoral roll

Making sure you are on the electoral roll is an easy fix, but can really make a difference to your credit score. Our advice would be that if you aren’t on it, then make sure you are. 

The reason why this can make such a difference to your score is simple. When you register for the electoral roll you have to give information about yourself like your name and address. This information can help lenders confirm that you are who you say you are and this can increase your credit score. 

It could also save you time on credit applications. Lenders may not need to ask for as much documentation to prove your identity as they’ll have the electoral roll for some of this information.

2. Make regular payments on time

If you regularly make payments on time then this shows to lenders that you are a reliable borrower and capable of handling credit responsibly. This makes you more appealing to lend to as lenders will be more trusting that you can make payments regularly, increasing your credit score. If you don’t make payments regularly this will decrease your credit score. 

Accounts that have been open for a while and paid regularly on time will positively impact your credit score. Our suggestion is to maintain regular payments on your credit card and pay them off every month, as well as make sure you have direct debits set up for any finance you my have.

Ultimately if you pay your bills on time, you are showing the lender that you have got enough cash flow to cover your expenses. Paying late only means that your lender will inform your late payment to the credit reference agencies (the people who inform your credit score), resulting in damage to credit history and a lowering your score.

A lady making a payment

2. Make regular payments on time

If you regularly make payments on time then this shows to lenders that you are a reliable borrower and capable of handling credit responsibly. This makes you more appealing to lend to as lenders will be more trusting that you can make payments regularly, increasing your credit score. If you don’t make payments regularly this will decrease your credit score. 

Accounts that have been open for a while and paid regularly on time will positively impact your credit score. Our suggestion is to maintain regular payments on your credit card and pay them off every month, as well as make sure you have direct debits set up for any finance you my have.

Ultimately if you pay your bills on time, you are showing the lender that you have got enough cash flow to cover your expenses. Paying late only means that your lender will inform your late payment to the credit reference agencies (the people who inform your credit score), resulting in damage to credit history and a lowering your score.

A lady making a payment

3. Keep credit utilisation low

Your credit utilisation is the percentage of your credit limit that you use. 

So to keep your credit utilisation low you shouldn’t use all of the credit available to you, in fact you should try to use as little of it as you need. Experian recommend keeping your credit usage as low as 30% to improve your credit score.

For example if you have £4,000 available to you, a low credit utilisation would be £1,200 as this is 30% of £4,000. 

3. Keep credit utilisation low

Your credit utilisation is the percentage of your credit limit that you use. 

So to keep your credit utilisation low you shouldn’t use all of the credit available to you, in fact you should try to use as little of it as you need. Experian recommend keeping your credit usage as low as 30% to improve your credit score.

For example if you have £4,000 available to you, a low credit utilisation would be £1,200 as this is 30% of £4,000. 

4. Check for any errors or mistakes on your report

You can sign up for free accounts on ClearScore, Experian and Credit Karma which will show you exactly what’s on your credit file from the 3 main credit reference agencies. 

If you are unsure why your credit score is low or even decreasing, take a look through your report. You can do this as often as you like without it affecting your credit score.

Check your credit report regularly to make sure all your credit cards and any finance agreements you have are showing the right amount owed. You should also check for any old accounts that may still be showing, even the ones you may have closed down, including any from an ex-partner. 

If you have accounts linked with anyone who is no longer in your life, then their spending will affect your score. So, make sure to remove these joint accounts wherever possible. 

When you are checking for errors or mistakes on your report you can also easily report them as incorrect to the credit reference agency. For example, on the ClearScore app there is an area at the bottom of your report called ‘corrections’ that allows you to report a correction to your credit file.

Man checking a report

4. Check for any errors or mistakes on your report

You can sign up for free accounts on ClearScore, Experian and Credit Karma which will show you exactly what’s on your credit file from the 3 main credit reference agencies. 

If you are unsure why your credit score is low or even decreasing, take a look through your report. You can do this as often as you like without it affecting your credit score.

Check your credit report regularly to make sure all your credit cards and any finance agreements you have are showing the right amount owed. You should also check for any old accounts that may still be showing, even the ones you may have closed down, including any from an ex-partner. 

If you have accounts linked with anyone who is no longer in your life, then their spending will affect your score. So, make sure to remove these joint accounts wherever possible. 

When you are checking for errors or mistakes on your report you can also easily report them as incorrect to the credit reference agency. For example, on the ClearScore app there is an area at the bottom of your report called ‘corrections’ that allows you to report a correction to your credit file.

Man checking a report

5. Consider unused credit and store cards

You may be thinking will a credit card improve my credit score? Well the answer is yes, if used correctly.

The more you can use a credit card responsibly and pay off on time each month, the more a lender sees you as someone who is responsible with credit. 

Not using a credit card can have the opposite effect and can look as though you don’t use credit, and therefore there is less or limited information on whether you’re responsible with it. So if you have credit cards that you haven’t used for years, consider whether you still need the account.

5. Consider unused credit and store cards

You may be thinking will a credit card improve my credit score? Well the answer is yes, if used correctly.

The more you can use a credit card responsibly and pay off on time each month, the more a lender sees you as someone who is responsible with credit. 

Not using a credit card can have the opposite effect and can look as though you don’t use credit, and therefore there is less or limited information on whether you’re responsible with it. So if you have credit cards that you haven’t used for years, consider whether you still need the account.

6. Avoid too many finance applications

If you make lots of finance applications in a short space of time this could suggest to lenders that you are desperate for the credit and therefore it may not be responsible to lend to you. 

Applications for credit can start with either a soft or a hard credit search. If you apply for car finance with us, we’ll initially only do a soft search until we know that you are happy to proceed with your application. However not all lenders are the same, and every hard search that happens on your credit file will negatively impact your credit score. 

As a rule of thumb, Experian suggest to not have more than 1 hard credit search on your report in a 3 month period, with most hard searches remaining on your credit file for 12 months. Once these are removed off your credit file you should see a positive change to your credit score. 

counting money

6. Avoid too many finance applications

If you make lots of finance applications in a short space of time this could suggest to lenders that you are desperate for the credit and therefore it may not be responsible to lend to you. 

Applications for credit can start with either a soft or a hard credit search. If you apply for car finance with us, we’ll initially only do a soft search until we know that you are happy to proceed with your application. However not all lenders are the same, and every hard search that happens on your credit file will negatively impact your credit score. 

As a rule of thumb, Experian suggest to not have more than 1 hard credit search on your report in a 3 month period, with most hard searches remaining on your credit file for 12 months. Once these are removed off your credit file you should see a positive change to your credit score. 

counting money

7. Cutting bad financial ties

We briefly touched upon it in point 4. But having financial ties to people who are no longer in your life can really affect your credit score. You will be financially tied to someone if you previously opened a joint account or took out credit together, this can be from vehicle finance to a mortgage. If they have a bad credit score, or even have a CCJ on their record, this could reflect negatively on you and your credit score because you are financially tied.

You can cut these bad financial ties by closing down the accounts that you had together and in time your credit score should repair itself. 

7. Cutting bad financial ties

We briefly touched upon it in point 4. But having financial ties to people who are no longer in your life can really affect your credit score. You will be financially tied to someone if you previously opened a joint account or took out credit together, this can be from vehicle finance to a mortgage. If they have a bad credit score, or even have a CCJ on their record, this could reflect negatively on you and your credit score because you are financially tied.

You can cut these bad financial ties by closing down the accounts that you had together and in time your credit score should repair itself. 

How long does it take to improve my credit score?

The million-dollar question can often be ‘how long does it take to improve my credit score?’. Unfortunately, there is no clear-cut answer as it depends on what is negatively impacting your score and what your score is to begin with. So, for some it could be a few months and others a few years. 

If your credit score is being impacted by lack of credit history or even unused credit cards, then these things can be changed quickly and may reflect on your credit report and therefore your score in a couple of months. 

However negative marks on your credit file will show on your credit file for years which directly impact your credit score. With Equifax explaining that missed payments can show on your credit file for up to 6 years. 

The speed in which your credit score improves also depends on how quickly lenders report to the credit reference agencies. For example, you may have reduced your credit utilisation or paid off your credit card, but the lender may not report this for several months. 

If you follow the 7 steps above to improve your credit score, then slowly but surely you will hopefully start to see your score rise. And as we said right at the beginning, even a small positive change to your score could make the difference between 1-2% on your offered APR and make a large difference to the cost of your loan. 

How long does it take to improve my credit score?

The million-dollar question can often be ‘how long does it take to improve my credit score?’. Unfortunately, there is no clear-cut answer as it depends on what is negatively impacting your score and what your score is to begin with. So, for some it could be a few months and others a few years. 

If your credit score is being impacted by lack of credit history or even unused credit cards, then these things can be changed quickly and may reflect on your credit report and therefore your score in a couple of months. 

However negative marks on your credit file will show on your credit file for years which directly impact your credit score. With Equifax explaining that missed payments can show on your credit file for up to 6 years. 

The speed in which your credit score improves also depends on how quickly lenders report to the credit reference agencies. For example, you may have reduced your credit utilisation or paid off your credit card, but the lender may not report this for several months. 

If you follow the 7 steps above to improve your credit score, then slowly but surely you will hopefully start to see your score rise. And as we said right at the beginning, even a small positive change to your score could make the difference between 1-2% on your offered APR and make a large difference to the cost of your loan. 

 
Hannah Scott, Senior Credit Risk Manager
Bringing you advice and tips so you can better understand and manage your finances and credit score.
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