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How to Improve Your Credit Score: A Friendly Guide

Are you looking to give your credit score a little boost but not sure where to start? You’re in the right place! 

Think of this as a chat with a mate who just happens to know a thing or two about credit scores. 

We’ll keep it simple, straightforward, and jargon-free. Let’s dive in!

how to improve your credit score

Understanding Your Credit Score

First things first, what exactly is a credit score? In a nutshell, it’s a number that lenders use to decide how likely you are to pay back money you borrow. 

Scores range from 300 to 850, with higher scores being better. 

A good credit score can open doors to better interest rates on loans, credit cards, and even affect your chances of renting a flat or landing a mobile phone contract.

Check Your Credit Report Regularly

  • Get a free report: You can get a free copy of your credit report once a year from each of the major credit reporting agencies. This is your financial report card, so give it a good look!
  • Spot any errors: Keep an eye out for mistakes or fraudulent activity. If you spot something fishy, report it immediately to the credit bureau.

Pay Your Bills on Time

This one might seem like a no-brainer, but it’s worth repeating. Even a single late payment can ding your credit score. 

Set up direct debits or reminders to ensure you’re always on time.

Reduce Your Credit Card Balances

High balances on your credit cards can hurt your score. 

Aim to keep your credit use (that’s the amount you owe compared to your credit limit) below 30%. For example, if you have a £1,000 limit, try to keep your balance under £300.

Don’t Open Too Many New Accounts at Once

Each time you apply for credit, it can temporarily lower your score. So, if you’re planning to apply for a big loan, like a mortgage, it’s best to hold off on opening new accounts.

Keep Old Accounts Open

Long-standing accounts with good payment histories are golden for your credit score. So, think twice before closing that old credit card, even if you don’t use it much.

Diversify Your Credit

Having a mix of different types of credit (like a credit card, credit catalogues, car loan, and mortgage) can be a good thing for your score, as long as you’re managing them all responsibly.

Expert Advice

To improve your credit score in the UK, financial experts recommend the following top advice:

  1. Check Your Credit Report and Correct Mistakes: Regularly review your credit report to ensure accuracy and address any errors promptly.
  2. Register to Vote: Registering on the electoral roll improves your credit score. Make sure to register at your current address.
  3. Make Rent Payments Count: Report your rent payments to credit agencies to boost your credit score. Ensure accurate reporting of these payments.
  4. Avoid Financial Associations with Ex-Partners: Ending financial ties with ex-partners can prevent their credit history from affecting yours, potentially boosting your score1.
  5. Avoid CCJs and Bankruptcy: Steer clear of county court judgments (CCJs) and bankruptcy, as these can significantly lower your credit score. Explore alternatives if facing financial difficulties

Debunking Myths

The following are five myths about credit scores in the UK, debunked with information from the search results:

Myth 1: You only have one credit score

This is false. Every credit reference agency uses different metrics and criteria in their calculations, so nobody has one single static credit score.

Myth 2: Not needing to borrow money means you have a good score

This is false. If you’ve never borrowed, you don’t have a credit history, which makes it much harder for lenders to make a judgement. Repaying your credit card statement balance in full each month is a great financial move, but not borrowing at all does not indicate a good credit score.

Myth 3: Paying off a missed payment removes it from your report

This is false. While paying off the missed payment will help improve your credit score, the record of the missed payment will still appear on your credit report for a certain period.

Myth 4: Checking your credit score negatively affects it

This is not always the case. Checking your own credit score is considered a ‘soft search’, which does not affect your score as only you can see it on your credit report, and it doesn’t matter how many there are or how often they are done.

Myth 5: Your income and savings are considered when determining your credit score

This is false. While your income and savings are considered when determining your affordability for credit, they have no influence at all on your credit score.

FAQs

How long does it take to improve my credit score?

Improving your credit score can take time, as it’s influenced by various factors. 

While some quick steps can be taken to give your ratings a boost, such as registering on the electoral roll or using Experian Boost, a significant improvement may take several months.

How does paying for insurance upfront affect my credit score?

Paying for insurance upfront does not directly affect your credit score. However, paying in monthly instalments involves entering into a credit agreement, which is a type of high-interest loan. 

This can affect your credit score, as insurers will look at your credit file. These ‘hard checks’ are visible to other lenders and can bring down your score. 

Additionally, paying monthly premiums is more expensive than paying upfront1.

How does ending financial ties with someone affect my credit score?

Ending financial ties with someone, such as a partner or ex-partner, can have a positive impact on your credit score.

If you have a joint account, mortgage, or loan with someone who has a poor credit rating, it could affect how lenders view you. 

By ending these financial ties and contacting the credit reference agency to remove them from your credit report, you can improve your credit score.

Does checking my own credit score negatively affect it?

Checking your own credit score is a ‘soft search’ and does not affect your score. Only you can see it on your credit report, regardless of frequency.

How do credit cards help improve my credit score?

Using credit cards responsibly is one of the best ways to build credit. By making regular payments on time and keeping your credit utilisation low, you can demonstrate good financial habits to lenders. 

This can increase your chances of getting credit at the best rates.

Remember, closing a card with a high credit limit can hurt your credit score by increasing your credit utilisation rate.

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