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How to improve your credit rating and credit score

Jafar Hassan
Written by Jafar Hassan, Content editor

Edited by Marianne Curphey, Finance Writer, 13 October 2020

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

There are numerous factors that can have an impact on your credit rating and credit score. These can include, a loan, a mortgage or even a new mobile phone contract. Playing an important part in whether you get accepted for credit and therefore, 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.

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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.

You can also compare credit cards designed to improve your credit rating.

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

  • Check your credit report regularly

  • Protect your identity

1. 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.

Checking your credit report can help you to improve your credit score because you can check how accurate it is and that it reflects your circumstances.

2. 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 your application down.

3. Get your name on household bills and pay on time

If have a history of paying your bills on time it can help to improve your credit score.

However, 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.

4. 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.

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

5. 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 your debts more affordable right now (though, generally consolidating debt costs you more in the long run and should always be approached with caution).

But 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.

6. 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.

7. 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.

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.

8. 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.

9. Set the record straight

Check your credit report regularly to make sure that all the information it contains is correct. If you notice any errors, you can contact the relevant lender and ask for them to be corrected - you will be expected to provide proof that a mistake has been made.

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.

10. 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?

With the growth of technology and a developing need for communicating easily and efficiently, the number of people with a mobile phone contract is increasing. As so many now own a mobile phone, this is a bill that many are likely to have as a continuous monthly outgoing.

The monthly fee that you pay for your mobile phone contract can be seen as a form of credit, as you're essentially paying for credit of a service. For many contracts you may need to pass a credit check to even 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 a specified 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 effect future applications for credit. So much like other bills, your phone contract can effect your credit score, either in a positive or negative way.

Is it bad to have too many credit cards?

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 victim of not even having a credit history - good or bad or of identity fraud.

  •  Many young people struggle to get their first credit card as lenders do not have a financial history to compare.

I have a bad credit rating but would like a credit card that rewards on purchases. What are my options?

If you are keen to reap rewards when you spend but are restricted by a bad or non-existent credit rating, the good news is that there are still cashback cards available to you. These are not nearly as rewarding as others on the market though, so your priority should be to rebuild your credit rating to make yourself eligible for these more competitive cards in the future.

To rebuild your score you will need to use your credit card regularly, never missing a payment and always staying within the limit.

Use your cashback card to get a small reward for repaying in full every month while you work towards rebuilding your credit rating. Only get these cards if you can pay the balance off in full every month as the interest rate is likely to be higher than standard cards.

If you end up building debt on these types of cards you could wipe out any cashback gains you might have made and risk landing yourself deeper in debt and damaging your credit rating further.

Do you know your credit score?

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