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How to improve your credit rating and credit score

Whether you're looking for a credit card, loan, or even a mobile phone deal, your credit score is important - find out how to improve your credit rating.

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How to improve your credit rating and credit score
How to improve your credit rating and credit score

Numerous factors have an impact on your credit rating and credit score. These can include a loan, a mortgage or even a new mobile phone contract. All play an important part in whether you get accepted for credit or get the deal you want.

Do you know your credit score?

There are three main and several smaller credit agencies, you can compare their services with Uswitch.

Don't panic if your credit score isn't perfect – our top tips could help you to improve your credit score and make your credit report look more appealing to potential lenders.

How to improve your credit rating

Step-by-step on how to improve your credit score

  • Check your credit report and amend any details that aren't correct.

  • Make sure you're on the electoral roll

  • Get your name on some household bills, pay them on time

  • Close any outstanding credit accounts you no longer use

  • Try to consolidate any debts

  • Build up a history of responsible borrowing

  • But don't apply for too much credit in a short space of time

  • Be careful of credit repair companies

  • Have a regular income

  • Protect your identity

  • Check, and re-check, your credit report for mistakes

Lenders look at your credit report when you apply for a loan, credit card, mortgage or any other type of credit account to see what you already owe, how well you're keeping up with your repayments and whether you can afford to borrow more. Your credit score often matters more than having substantial savings or income.

Checking your credit report with each of the three main agencies, Equifax, Experian and TransUnion can help you to improve your credit score because you can check how accurate it is and that it reflects your circumstances. If there are any errors or omissions, take the time to dispute your credit report and get it corrected.

Checking your credit rating regularly is recommended by the Home Office to help protect yourself against identity fraud. You might spot something applied for or taken out that was not by you. And any attempted frauds listed by CIFAS (the UK's fraud database) will show up.

If you have a good reason for any credit problems, for example if you were ill and couldn't make your payments on time as a result, you can add something called a Notice of Correction to your account. Potential lenders will be able to see this explanation - again, be prepared to provide proof.

Re-check your credit reports regularly to make sure they are correct and up to date.

  • Make sure you're on the electoral roll

If you haven't done so already, register to vote at your current address - lenders use the electoral roll to check that you live where you say you live, so it can help to improve your credit report.

If you aren't registered or are listed at another address, the lender may ask for further proof of your identity and address, or could even turn down your application.

And lenders prefer you to have stayed in one place for some time, rather than be changing address frequently.

  • Get your name on household bills and pay on time

Although energy bills, for example, do not appear on credit reports unless you miss payments and your arrears are sent to collections, they will help you with identity checks. Other bills, like broadband and TV, often do get reported and if you have a history of paying your bills on time it can help to improve your credit score.

If you miss payments or don't make them on time, as well as incurring penalties, a note will stay on your credit report for at least three years - which could give a bad impression to lenders.

Make sure you space out when you switch providers for household services like gas electricity and broadband, rather than doing them all at the same time of year. Each switch results in a hard search on your credit record and too many, too close together, worsens your score for a short time. So don't sign up to new contracts just as you about to apply for a loan or mortgage. Wait until after your loan has been approved.

But if switching energy or mobile provider will significantly cut your bill and make it more affordable, that remains be a sensible choice. Energy bills do not appear on your credit report but the hard searches firms do to check on your creditworthiness are recorded.

  • Close any credit accounts you don't use

It can help to improve your credit score if you close any credit accounts you don't use. When looking at your credit report, lenders take into consideration the amount you could borrow, not just what you actually owe.

Also make sure you close any joint accounts you might have had, particularly if the other person is not good at managing money. Their behaviour could drag down your credit score.

As a rule, it's better to have a few well-managed accounts, than a lot of accounts that you don't use.

  • Think about consolidating your debts

Consider consolidating your debts - identify which of your credit accounts are most expensive and see if you could consolidate them into a one, lower-cost loan.

This won't directly improve your credit score, but it could make your debts more affordable right now. If this enables you to close several credit accounts you struggle with, it could help improve your score as you'll have fewer accounts open.

  • Don't apply for lots of credit accounts in a short space of time

Each time you apply for credit and a lender looks at your credit report, a record of their check called a 'footprint' is made. If other lenders see a lot of footprints on your account in a short space of time it may hurt your chances of getting credit.

Keep the number of footprints on your credit report down and it could help to improve your credit score.

Your credit report lists every application for credit you've made in the last year, so by checking this, you can make sure you don't reapply to a lender that has already rejected you.

  • Build a credit history

Many people struggle to get the credit they want, not because they have a bad credit history, but because there isn't enough information on their credit report for lenders to go on. This is commonly called having a 'thin' credit report.

Lenders want to see evidence that you're a responsible borrower and if you haven't taken out many credit accounts before, this history won't be there.

One of the quickest ways to build up a credit score is to use a 'credit builder card' that will give you access to limited credit. If you manage this responsibly and don't miss any repayments your credit score should soon improve. Credit builder cards are best used in the short term (6 to 12 months) to build a credit history, paying them off in full each month as they have very high interest rates. You can soon move on to a better APR credit card.

It's also best not to borrow all your available credit at once – don't max out your credit cards. This gives the impression that you are desperate and are unable to control your spending.

  • Be careful of credit repair companies

Exercise caution when it comes to credit repair companies claiming they can improve your credit score.

Credit repair companies claiming that they can remove or change the data on your credit report often charge hefty fees and may not be able to deliver on their promises.

  • Try to keep your income regular

If you have a few zero-hour contract jobs, the income you have could be big enough to match the minimum eligibility criteria for some credit cards and other lending products. But the fact that your income is not fixed makes it harder to prove that you will be a reliable borrower.

Some lenders and credit card providers will make it less difficult for people with low incomes or without a fixed income to apply, but a permanent job is always better for your credit applications.

  • Protect your identity

Check your credit report regularly for unfamiliar or suspicious entries, like a new account you didn't open, an increase in the amount you owe which you can't explain or new applications for credit you didn't make - these could all be signs that you've been a victim of identity fraud.

Do phone contracts improve credit score?

hands holding mobile phone

The monthly fee that you pay for your mobile phone contract is a form of credit, as you're running up a bill and paying it off later. You may need to pass a credit check to  take out the initial contract, although there are some contracts where this won't be required.

Like other bills that you might have, you will be contracted to pay the billed amount each month. Therefore, should you miss a bill or make a late payment, this will impact your credit score and have a negative effect on your credit rating.

Any defaults that occur as a result of missed payments for your phone contract, can go on to affect future applications for credit. So much like other bills, your phone contract can affect your credit score, either in a positive or negative way.

Is it bad to have too many credit cards?

a pile of different credit cards

Having a credit card, using it regularly and paying it off in full regularly can really boost your credit score. Every time you repay your credit balance you are showing other creditors that you're a reliable person to lend money to. This could help with future applications for larger amounts of credit, such as a mortgage.

While credit cards are a great way to borrow for short periods of time, the greater the number of credit cards you have the greater the risk from fraud.

Also, lenders look at your potential credit as well as your actual debt when deciding whether to lend to you, so having a lot of credit cards might mean they are reluctant to approve your application for even more credit. Plus you have the temptation to take on potentially more debt than you can afford to repay.

Why have I been refused credit?

There are a number of potential reasons for this:

  • If you have missed any payments - this could have made a mark on your credit report and make you look unreliable to a potential lender. This could be anything from a loan or credit card repayment, mobile phone contract or missing a mortgage payment.

  • You are not registered on your local electoral roll

  • You have financial ties to someone with a bad credit history

  • You have a lot of potential credit – a lender will also take into account how many bank accounts you have and how much debt you currently hold or credit you could use.  

  • You may also be a victim of not even having a credit history. Many young people struggle to get their first credit card as lenders do not have a financial history to compare.

  • You may have been a victim of identity fraud.