How to improve your credit score

For many people, being turned down for credit is a frustrating part of life. It can create a great deal of stress, along with concerns that you don’t have a reasonable chance of being accepted for subsequent loan or credit card applications in the future.

One of the most important aspects in these situations is how positive and desirable your credit rating is. The good news is there are plenty of ways to improve your credit score – you’re not stuck with a low or middling credit score forever. Some people may need to boost their credit rating quickly, whereas for others, a slower, more gradual and sustained approach may be ideal.

So, read on to find out how to get a better credit score with our helpful guide.

In this guide:

• Understanding credit scores
• Why your credit score matters
• How to improve your credit score
• How long does it take to improve a credit score?

Understanding credit scores

A credit score is a number that shows how reliable you are with borrowing money. Lenders use it to help decide whether to offer you credit, as well as how much and at what interest rate. The score is based on your past borrowing history, considering factors such as how much you owe, whether you pay on time and other financial behaviour. Scores typically range from 0 to 999, but it depends on the credit agency.

It's important to understand that each lender will assess different criteria when deciding to approve or decline your application. This is known as the ‘lending decision process’, and ultimately means you could be declined by one company but find you’re accepted for credit by another, as each will have their own lending criteria.

You can check whether you have a good credit score or bad credit score using various apps and websites. If you’re unsure where to begin, read our guide on how to check your credit score for free.

Why your credit score matters

When lenders carry out a credit check, they’ll be looking at your level of creditworthiness. For instance, how well you’ve been able to handle debt in the past and the state of your current finances. Whilst this may feel somewhat intrusive, it’s all for good reason.

Lenders complete these checks to determine whether or not your past behaviour suggests that you’ll be able to make full repayments if the lender approved you for a loan.

A higher credit score means you’re more likely to be approved for credit, and you may also be offered better interest rates – or a larger amount – than someone with a lower credit score. A lower score doesn’t mean you’ll always be turned down, but it can limit your options and lead to higher interest costs.

Your credit score can affect applications for:

• Loan approvals
• Credit card limits
• Mortgage eligibility
• Car finance
• Mobile phone contracts

However, there are a number of reliable ways to improve your credit score and your desirability to a lender as a prospective borrower. Learn more about how interest rates work with our complete guide.

How to improve your credit score

Follow on for tips on how to boost your credit score, step-by-step.

Pay off outstanding balances

Always pay off outstanding balances on loans or credit cards before applying for new credit, as lenders will often consider this when assessing your application. If you have high levels of existing debt, you’re less likely to be accepted for a loan.

Alternatively, if approved, you may receive higher interest rates, as you might be considered a higher risk due to the outstanding debt(s).

You can increase your credit score by showing responsible use, which means making your regular payments on time and keeping credit balances relatively low.

On the other hand, you shouldn’t assume that having unused credit cards will help you with your credit score. In fact, this could even negatively impact it, as you may not show a history of regularly paying money back.

Check your credit report regularly

Credit file mistakes are more common than people may realise, and they can end up harming your credit score – but they’re easily amended if you see one.

It’s recommended that you check your credit report at least once a year. Try to review your file with each of the main credit reference agencies, as each of them are likely to have different information on their files about you. These include:

• Experian
• Equifax
• TransUnion

If you see any errors, contact the provider in question directly.

Watch out for fraud

Did you know that it takes the average person ten months to discover they’ve been a victim of fraud? Check your credit card and bank statements every month to identify any unrecognised activity and report it immediately to both your card provider or bank and the government’s fraud department, Action Fraud.

The sooner action is taken, the less impact it will have on your credit score, as more can be done to deal with the fraudulent activity. It also helps that the borrower is viewed as responsible and ‘on top’ of their finances.

Build up a positive credit history

Those who have never borrowed money before may be surprised to find they have a hard time gaining access to credit. Lenders can regard the absence of a credit history in a negative light, as they are unable to predict the future behaviour of the borrower. If you’re in this situation, you could apply for a credit card, use it for small amounts each month and pay the bill in full every month.

Request quotes or a soft search

Some people may consider applying for multiple loans or credit cards within a short period of time to maximise their chances of being accepted for credit by at least one of the lenders. However, this approach can be a mistake, as each application has the potential to lower your credit score. This is why you should request quotes before applying to compare various financial products.

A quote has no impact on your credit score and will give you the information you need to make an informed decision.

You should also look out for lenders who perform a ‘soft credit search’, as this can let them access some of your financial information without impacting your credit score. Applying with a ‘hard search’ for credit multiple times can lower your score.

Stability is important

Someone who moves from place to place or switches jobs every six months may be seen as a higher risk to lenders than someone who has a stable background and employment. Instability may indicate that the individual could struggle to make repayments in the future.

Register to vote

One of the easiest and best ways to help improve your credit score is by registering to vote and appearing on the electoral register. This register provides information on who’s eligible to vote at an address. It’s also one of the first things lenders will check to verify your identity and address history.

If you’re untraceable, this can signal alarm bells for the lender. If you default on your loan with them, it might mean you’ll be harder to contact for repayments. Consider registering to vote a quick win – it only takes a few minutes to register online and can give your score a relatively rapid boost.

Pay bills promptly

Lenders look at payment history when determining someone’s ability to repay the funds being requested. This is why you should make every effort to pay your bills on time to boost your credit rating. Even one missed payment can end up reducing your credit score, as it’s one of the most important factors that influences it.

If you’re worried that you may miss a payment, set it up so that the money comes out of your bank account automatically to meet repayments. Alternatively, you can set up a payment reminder, so you never miss a due date – whether it’s for a credit card, utility bill or loan repayment.

How long does it take to improve a credit score?

Improving your credit score often takes time, but changes can start to show within a few months. If you’re correcting a small error or registering on the electoral roll, you might see a difference quickly. But if you’ve missed payments or defaulted on loans, it can take longer for your score to recover. Staying consistent is the key to keeping your score ticking upwards.

Explore more helpful insights

There are plenty of ways to boost your credit score, from simple acts like joining the electoral roll to long-term solutions like making regular payments. The main thing is to be consistent and regularly check your credit report. That way, you can keep on top of how you’re doing and see if there are any mistakes.

Explore more financial tips and insights with our blog, including our guides to how long missed payments stay on your credit report and how to create long-term financial goals.

If you require any expert money or debt advice, free and independent support is available from organisations and charities such as StepChange, Citizens Advice and MoneyHelper.