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How to improve your credit score
Updated: Thursday, 20 July 2023
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 includes most lines of credit you have or have had in the past, such as credit cards, loans, and 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 or even missed a payment.
In this article, we’ll explore the different ways you could improve your credit score and how this may help you.
It’s important to know that everyone’s circumstances are different, and there are lots of factors that could affect your credit score positively or negatively.
In this guide
- Why should I improve my credit score?
- Tips to improve your credit score
- 1. Register for the electoral roll
- 2. Make regular payments on time
- 3. Keep your credit utilisation low
- 4. Check for any errors or mistakes on your credit report
- 5. Consider unused credit and store cards
- 6. Avoid too many credit applications
- 7. Cut bad financial ties
- 8. Consider a credit-building card
- 9. Use an eligibility checker or calculator
- 10. Add rent payments to your credit records
- How long does it take to improve my credit score?
Why should I improve my credit score?
If your credit score is bad, then you may be seen as a higher risk in the eyes of the lender. Someone with a high credit score usually has that score because they have shown they can handle credit responsibly by paying it back in full and on time.
So, what’s the point of improving your credit score, and why would this benefit you? Below are some of the benefits you might get from having good credit:
- May increase your chances of approval: having good credit may make it easier to get approved for finance, but remember, other factors such as income and affordability also affect your eligibility
- Higher credit limits: if you’re looking to apply for car finance or a credit card, a higher credit score could mean you are able to borrow more
- More choice: for example, if you’re looking for car finance with bad credit, you may have to use a specialise lender. If you have good credit, you might have more options
- Lower interest rates: lenders will usually offer lower-risk applicants better interest rates, which can make borrowing cheaper.
Representative 30.7% APR.
Tips to improve your credit score
Lots of factors can affect your credit score. But there is also a lot you can do that may increase your chances of getting finance and improving your credit score is high on that list.
If you’ve previously had financial difficulties, IVAs (Individual Voluntary Arrangements) and CCJs (County Court Judgments) will remain on your credit file for up to 6 years, which will affect your credit score. Thankfully, there are still lots of things you can do that might improve your credit score, even if you’ve had an IVA or CCJ.
Every little helps with credit scores, and there might be simple things you could do to improve it slightly. Doing so could mean the difference between a few percent on your loan’s APR, which could save you money in the long run. If you’re not sure what an APR is, check out our guide that answers the common question “what does APR mean?‘.
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 you have a poor credit score, then you may be seen as a higher risk in the eyes of the lender, which could make it more difficult to get approved.
But the real question is, how can you improve your credit score?
1. Register for the electoral roll
Making sure you are on the electoral roll is an easy fix, but it can really make a difference to your credit rating. You can register online, and it should only take around 5 minutes. Remember, you’ll need to re-register if you move to a new address.
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 provides proof of address.
It could also save you time on credit applications. Lenders may not need to ask for much documentation to prove your identity, as they can refer to the electoral roll for some of this information.
2. Make regular payments on time
If you regularly make payments on time, this shows lenders that you are a reliable borrower and capable of handling credit responsibly. This can make 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. You could set up direct debits to make sure your payments are made in full and on time.
Paying late, or missing a payment, means that your lender will inform the credit reference agencies (the people who calculate your credit score), which will usually lower your credit score.
3. Keep your credit utilisation low
Your credit utilisation is the percentage of your total credit that you are using. For example, if you have a £4,000 credit limit on your credit card, and you are using £2,000 of it, your credit utilisation is 50%.
Having a high credit utilisation indicates that you are reliant on borrowing and aren’t using credit responsibly. A lower percentage may show that you can manage credit well.
To keep your credit utilisation low, you shouldn’t use all of the credit available to you. recommend keeping your credit utilisation below 30%.
For example, if you have £4,000 credit available to you, Experian recommends using up to £1,200, as this is 30% of £4,000. If you use higher than that, it may negatively affect your credit score.
4. Check for any errors or mistakes on your credit report
You can check your credit report for free with services like Experian, ClearScore, and Credit Karma, which will also provide you with some personal recommendations for what you can do to get a good credit score. You can check your credit report as often as you like without affecting your credit score.
Check your credit report regularly to ensure the information is correct and up to date. You can also check for any old accounts that may still be showing on your report, even the ones you may have closed down, including any from an ex-partner.
If you find an error on your credit report, it’s important to dispute it with the credit reference agency (CRA) themselves:
There is also something called a ‘notice of correction’. This is a short statement of 200 words that you can add to your credit report, which lenders will see on your report. You can use this to explain personal circumstances or other factors that lenders should consider. For example, you might use it to explain that your missed payments were because of health problems or unemployment.
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 you use it responsibly and pay it off on time each month, lenders will see you as a reliable borrower.
Should you cancel unused store and credit cards?
Unused cards can be easy targets for fraudsters looking at committing identity theft.
But cancelling credit card accounts can also put you at a disadvantage. Long-held credit cards provide lenders with a great insight into your borrowing history. Without this, lenders may see you as a higher risk. Cancelling cards will also increase your credit utilisation, so bear this in mind before you close your old accounts.
We can’t give financial advice, so you should do your own research and consider whether or not you need the credit card before deciding to keep or close it.
6. Avoid too many credit applications
If you make lots of finance applications in a short space of time, this could suggest to lenders that you are desperate for credit and rely on it to get by.
Credit applications can start with either a soft or a hard credit search. If you apply for car finance with us, we use 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 suggests not having more than two or three hard searches every few months, as most hard searches stay on your credit report for 12 months. Once these drop off your credit file, your score may increase.
7. Cut bad financial ties
Having financial ties to people who are no longer in your life can affect your credit score. You will be financially tied to someone if you previously opened a joint bank account or took out credit together, this can be anything 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 apply for a ‘notice of disassociation’ with each of the three credit reference agencies:
8. Consider a credit-building card
Credit-builder cards do exactly as they say on the tin: they help people who need to build their credit history from scratch or get their credit score back on track.
A credit-building card will typically have a low credit limit and a high-interest rate, which can cause your credit score to drop briefly when you first get your card. But if you use the card well, it can build your credit score over time.
9. Use an eligibility checker or calculator
Some lenders offer eligibility checkers so you can see what your chances might be of getting approved. Others offer tools that can help you understand what your finance might look like. If you’re looking for car finance, you could use our car finance calculator to see what your monthly repayments might be.
This won’t improve your credit score, but can prevent unnecessary hard searches which cause your credit score to drop. If you know there’s little chance of being accepted for the credit card account or car finance agreement you want to apply for, you might decide not to make an application which means there won’t be a hard search.
10. Add rent payments to your credit records
Social housing providers, property management companies, and private landlords can add information to Experian credit reports through the Rental Exchange Scheme. This helps those renting a home to build their credit history without taking out new credit.
Other services such as CreditLadder report your rent payments to the three main credit reference agencies (Experian, Equifax, and TransUnion).
It’s important to know that if your rent payments are reported to the CRAs, and you make a late or missed payment, your credit score will be negatively affected.
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. For some people, it could be a few months and for others, it could be a few years.
If your credit rating is being impacted by a lack of credit history or even unused credit cards, then these things can be changed quickly and may reflect on your credit report faster, than someone who is trying to improve their score after an IVA or CCJ for example.
Depending on the type of credit you’re applying for, your credit score is not the only factor that affects your chances of being approved. For example, there is no set credit score you need to get car finance.
However, negative marks on your credit file will show up for a number of years, which directly impact your credit score. Equifax explained that missed payments can show on your credit file for up to 6 years.
The speed at 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. Also, not all lenders report everything to the credit reference agencies. Some lenders only report to one or two, so your credit score will be different depending on which CRA you check with.
Even a small positive change to your score could make the difference between 1-2% on your offered APR and make a difference to the cost of your loan in the long run.
If you’re looking to buy a new car, did you know that financing a car can build your credit score? You might see a slight drop when you first take out an agreement, but your score may improve over time as long as you make your repayments in full and on time.
If you enjoyed this article, then you might enjoy our study which found the areas of the UK with the best credit scores.
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 includes most lines of credit you have or have had in the past, such as credit cards, loans, and 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 or even missed a payment.
In this article, we’ll explore the different ways you could improve your credit score and how this may help you.
It’s important to know that everyone’s circumstances are different, and there are lots of factors that could affect your credit score positively or negatively.
In this guide
- Why should I improve my credit score?
- Tips to improve your credit score
- 1. Register for the electoral roll
- 2. Make regular payments on time
- 3. Keep your credit utilisation low
- 4. Check for any errors or mistakes on your credit report
- 5. Consider unused credit and store cards
- 6. Avoid too many credit applications
- 7. Cut bad financial ties
- 8. Consider a credit-building card
- 9. Use an eligibility checker or calculator
- 10. Add rent payments to your credit records
- How long does it take to improve my credit score?
Why should I improve my credit score?
If your credit score is bad, then you may be seen as a higher risk in the eyes of the lender. Someone with a high credit score usually has that score because they have shown they can handle credit responsibly by paying it back in full and on time.
So, what’s the point of improving your credit score, and why would this benefit you? Below are some of the benefits you might get from having good credit:
- May increase your chances of approval: having good credit may make it easier to get approved for finance, but remember, other factors such as income and affordability also affect your eligibility
- Higher credit limits: if you’re looking to apply for car finance or a credit card, a higher credit score could mean you are able to borrow more
- More choice: for example, if you’re looking for car finance with bad credit, you may have to use a specialise lender. If you have good credit, you might have more options
- Lower interest rates: lenders will usually offer lower-risk applicants better interest rates, which can make borrowing cheaper.
Representative 30.7% APR.
Tips to improve your credit score
Lots of factors can affect your credit score. But there is also a lot you can do that may increase your chances of getting finance and improving your credit score is high on that list.
If you’ve previously had financial difficulties, IVAs (Individual Voluntary Arrangements) and CCJs (County Court Judgments) will remain on your credit file for up to 6 years, which will affect your credit score. Thankfully, there are still lots of things you can do that might improve your credit score, even if you’ve had an IVA or CCJ.
Every little helps with credit scores, and there might be simple things you could do to improve it slightly. Doing so could mean the difference between a few percent on your loan’s APR, which could save you money in the long run. If you’re not sure what an APR is, check out our guide that answers the common question “what does APR mean?‘.
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 you have a poor credit score, then you may be seen as a higher risk in the eyes of the lender, which could make it more difficult to get approved.
But the real question is, how can you improve your credit score?
1. Register for the electoral roll
Making sure you are on the electoral roll is an easy fix, but it can really make a difference to your credit rating. You can register online, and it should only take around 5 minutes. Remember, you’ll need to re-register if you move to a new address.
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 provides proof of address.
It could also save you time on credit applications. Lenders may not need to ask for much documentation to prove your identity, as they can refer to the electoral roll for some of this information.
2. Make regular payments on time
If you regularly make payments on time, this shows lenders that you are a reliable borrower and capable of handling credit responsibly. This can make 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. You could set up direct debits to make sure your payments are made in full and on time.
Paying late, or missing a payment, means that your lender will inform the credit reference agencies (the people who calculate your credit score), which will usually lower your credit score.
3. Keep your credit utilisation low
Your credit utilisation is the percentage of your total credit that you are using. For example, if you have a £4,000 credit limit on your credit card, and you are using £2,000 of it, your credit utilisation is 50%.
Having a high credit utilisation indicates that you are reliant on borrowing and aren’t using credit responsibly. A lower percentage may show that you can manage credit well.
To keep your credit utilisation low, you shouldn’t use all of the credit available to you. recommend keeping your credit utilisation below 30%.
For example, if you have £4,000 credit available to you, Experian recommends using up to £1,200, as this is 30% of £4,000. If you use higher than that, it may negatively affect your credit score.
4. Check for any errors or mistakes on your credit report
You can check your credit report for free with services like Experian, ClearScore, and Credit Karma, which will also provide you with some personal recommendations for what you can do to get a good credit score. You can check your credit report as often as you like without affecting your credit score.
Check your credit report regularly to ensure the information is correct and up to date. You can also check for any old accounts that may still be showing on your report, even the ones you may have closed down, including any from an ex-partner.
If you find an error on your credit report, it’s important to dispute it with the credit reference agency (CRA) themselves:
There is also something called a ‘notice of correction’. This is a short statement of 200 words that you can add to your credit report, which lenders will see on your report. You can use this to explain personal circumstances or other factors that lenders should consider. For example, you might use it to explain that your missed payments were because of health problems or unemployment.
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 you use it responsibly and pay it off on time each month, lenders will see you as a reliable borrower.
Should you cancel unused store and credit cards?
Unused cards can be easy targets for fraudsters looking at committing identity theft.
But cancelling credit card accounts can also put you at a disadvantage. Long-held credit cards provide lenders with a great insight into your borrowing history. Without this, lenders may see you as a higher risk. Cancelling cards will also increase your credit utilisation, so bear this in mind before you close your old accounts.
We can’t give financial advice, so you should do your own research and consider whether or not you need the credit card before deciding to keep or close it.
6. Avoid too many credit applications
If you make lots of finance applications in a short space of time, this could suggest to lenders that you are desperate for credit and rely on it to get by.
Credit applications can start with either a soft or a hard credit search. If you apply for car finance with us, we use 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 suggests not having more than two or three hard searches every few months, as most hard searches stay on your credit report for 12 months. Once these drop off your credit file, your score may increase.
7. Cut bad financial ties
Having financial ties to people who are no longer in your life can affect your credit score. You will be financially tied to someone if you previously opened a joint bank account or took out credit together, this can be anything 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 apply for a ‘notice of disassociation’ with each of the three credit reference agencies:
8. Consider a credit-building card
Credit-builder cards do exactly as they say on the tin: they help people who need to build their credit history from scratch or get their credit score back on track.
A credit-building card will typically have a low credit limit and a high-interest rate, which can cause your credit score to drop briefly when you first get your card. But if you use the card well, it can build your credit score over time.
9. Use an eligibility checker or calculator
Some lenders offer eligibility checkers so you can see what your chances might be of getting approved. Others offer tools that can help you understand what your finance might look like. If you’re looking for car finance, you could use our car finance calculator to see what your monthly repayments might be.
This won’t improve your credit score, but can prevent unnecessary hard searches which cause your credit score to drop. If you know there’s little chance of being accepted for the credit card account or car finance agreement you want to apply for, you might decide not to make an application which means there won’t be a hard search.
10. Add rent payments to your credit records
Social housing providers, property management companies, and private landlords can add information to Experian credit reports through the Rental Exchange Scheme. This helps those renting a home to build their credit history without taking out new credit.
Other services such as CreditLadder report your rent payments to the three main credit reference agencies (Experian, Equifax, and TransUnion).
It’s important to know that if your rent payments are reported to the CRAs, and you make a late or missed payment, your credit score will be negatively affected.
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. For some people, it could be a few months and for others, it could be a few years.
If your credit rating is being impacted by a lack of credit history or even unused credit cards, then these things can be changed quickly and may reflect on your credit report faster, than someone who is trying to improve their score after an IVA or CCJ for example.
Depending on the type of credit you’re applying for, your credit score is not the only factor that affects your chances of being approved. For example, there is no set credit score you need to get car finance.
However, negative marks on your credit file will show up for a number of years, which directly impact your credit score. Equifax explained that missed payments can show on your credit file for up to 6 years.
The speed at 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. Also, not all lenders report everything to the credit reference agencies. Some lenders only report to one or two, so your credit score will be different depending on which CRA you check with.
Even a small positive change to your score could make the difference between 1-2% on your offered APR and make a difference to the cost of your loan in the long run.
If you’re looking to buy a new car, did you know that financing a car can build your credit score? You might see a slight drop when you first take out an agreement, but your score may improve over time as long as you make your repayments in full and on time.
If you enjoyed this article, then you might enjoy our study which found the areas of the UK with the best credit scores.
For a better road ahead
Moneybarn is a member of the Finance and Leasing Association, the official trade organisation of the motor finance industry. The FLA promotes best practice in the motor finance industry for lending and leasing to consumers and businesses.
Moneybarn is the trading style of Moneybarn No. 1 Limited, a company registered in England and Wales with company number 04496573, and Moneybarn Limited, a company registered in England and Wales with company number 02766324. The registered address for these companies is: Athena House, Bedford Road, Petersfield, Hampshire, GU32 3LJ.
Moneybarn’s VAT registration number is 180 5559 52.
Moneybarn Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702781)
Moneybarn No. 1 Limited is authorised and regulated by the Financial Conduct Authority (Financial Services reference No. 702780)
