How can I improve my credit score?

What is a credit score? What’s your credit score? And how can you improve it?

credit score

Credit ratings are used by banks, building societies and other companies to decide whether to lend money to you, or to let you open an account. Each provider has its own system for judging whether you are the sort of customer it wants.

Following some general rules can help you improve your credit score.

Credit score explained

Your credit score is a number which helps others judge whether you have healthy finances. This is a number that reflects the financial information held on your credit file.

All of your financial decisions, including taking out a credit card or mortgage, are documented in your credit file. This includes accounts you may have applied and been declined for, plus details of any missed payments you may have had over the last six years.

Any joint accounts or loans you have will also be covered, plus details of how many times you have applied for other financial products.

Basic information such as name, address and date of birth are also displayed, plus whether you are registered on the electoral roll or have been declared bankrupt in the past.

Student loans and salary information are not recorded on your file.

What is it used for?

Banks want to understand customers’ likely behaviours and ensure they do business with reliable individuals.

If you have missed payments and fallen into arrears on multiple occasions, this will be reflected in your credit score and you may find it more difficult to take out new accounts or loans in the future, or you could be charged a higher rate of interest.

It is not just financial products that use credit scoring. For instance when you take out a mobile phone contract your network will check your credit score before it lets you take out the contract.

How do I check my score?

In the UK there are three credit scoring agencies:

  • Callcredit
  • Equifax
  • Experian

You can get a free credit report from any of these firms by post. You may want to do this before you take a major financial product such as a mortgage or loan. Checking your report will allow you to rectify any mistakes that may be on your file.

There are also free ways of accessing your credit score online:

Services which charge a monthly subscription to access your information are also available.

What is a good credit score?

What is viewed as a good credit score depends on the financial institution you are applying to. Each bank and building society will have its own set of criteria for it to judge a customer.

However, the higher your credit score, the better. Callcredit ratings is scored out of five, Equifax is scored out of 700 and Experian is scored out of 999.

In general, a Callcredit 4 out of 5, Equifax 420 out of 700 or Experian 880 out of 999 are considered ‘good’ scores.

How can I improve my score?

It is wise to ensure your finances are in top shape ahead of applying for any major financial products, such as a mortgage. If you’re aiming to buy your first home, getting your credit score in order is a smart move. Improving your credit score can be a slow process. However, there are some steps to follow which could give your rating a boost.

Register on the electoral roll

Registering on the electoral roll is a simple, and free, way to boost your score. If you are not registered to vote at your home address then it can be more difficult to verify your identity, which can lower your score.

Pay your bills on time

Paying your bills on time is an obvious way to show your financial responsibility. If you meet your existing financial commitments it is more likely you will be accepted for more.

Check for mistakes before applying

Checking for mistakes and fraud is a wise move. Errors can be found on people’s credit files and these should be corrected before you apply for a new product. You may also be linked to former partners and want to check how this affects your ongoing score.

If you have very poor credit rating, there are a range of credit cards which can help rebuild your score. However, the rate of interest charged is typically much higher than traditional cards, so be aware of extra charges.

Note: We take care to ensure Talking Finance content is accurate at the time of publication. Individual circumstances can differ so please don’t rely on it when making financial decision.