What is a credit score?
When you apply to borrow money, whether on a credit card, mortgage or personal loan, the lender will normally carry out a credit check to ensure you are suitable for the product and that you have a good credit history. This result of this check may influence whether or not to accept your application, the amount you will be able to borrow, the interest rate you will be charged and other terms.
A bad credit score may result in you getting limited or no credit from lenders. This may affect your ability to take out a loan, get a credit card or even apply for a mortgage.
It's really important to regularly check your credit score and maintain a healthy rating. Here are some top tips to maintain and improve your credit score over time.
1. Ensure you are on the Electoral roll
Not being registered on the electoral roll may have a negative impact on your credit score and at the very least delay your application for credit or even be rejected completely.
You will need to contact your local electoral registration authority to ensure you are registered on the electoral roll.
2. Check your credit file regularly
You can access your statutory credit report for just £2 and for free if you are a victim of ID fraud or are financially vulnerable.
There are also a number of companies offering free and paid services for obtaining your credit report and credit score online.
These services offer a number of different features such as alerts when your credit score has changed or when they suspect fraud is happening. The paid services attract a monthly fee but often offer a free trial version to test out beforehand
3. Make your repayments in full and on time
Your credit file includes a history of repayments to lenders including banks and credit cards. Your file may also include financial details with any utility companies you have had dealings with including energy firms or mobile phone contracts.
Missing payments could have a negative impact on your credit score. Making payments in full and on time may go towards maintaining or improving your credit score over time as lenders can see that you are managing your finances correctly.
4. Pay off existing high levels of debt
Lenders may be reluctant to accept your application to borrow money if you already have a high level of debt to repay. You should examine your existing financial commitments and reduce or eliminate your existing debt before applying for more.
5. Are you linked financially to someone else?
If you are linked financially with another person such as a joint bank account, joint mortgage, joint loan or even some joint utility bills, then the lender can also access their credit file as part of your credit check. If your partner has a poor credit history then this may affect your ability to obtain credit.
Therefore, it is wise to try and keep your finances separate if your partner has a poor credit history.
6. Don't apply for credit too many times
Every time you submit an application to borrow money, it leaves a note on your file. Applying multiple times for credit, especially in a short space of time may impact your ability to obtain credit.
Experian offer a free approval check before applying for a loan that will not impact your credit score.
7. Build up a good credit history
A credit score is based on your past financial history in order to try and predict your future financial management behaviour. Those without any credit history will also encounter this problem.
Try and build up a good credit history by maintaining utility bill and mobile phone contract repayments. Consider getting a credit builder credit card to help you start or rebuild a good credit history.
8. Close unused credit accounts
If you have open credit card accounts or other forms of credit open to you that you do not use, then close them. Lenders may take into account the amount of existing credit you have available before offering you more.
9. Be wary of fraudulent activity
Check your credit report regularly to ensure there are no suspicious entries that may be impacting your ability to obtain credit. You may be the victim of id theft.
10. Fix mistakes on your credit report
If you find that the information stored on your credit report is wrong then get it fixed. This may be hampering your ability to get credit. Check your file on a regular basis to ensure all your details are accurate.
Compare Credit Report Providers
|Company||Features||Trial Period||Subscription Per Month|
|Experian||30 Days||£14.99||See Deal|
|CreditReport.co.uk||30 Days||£12.99||See Deal|
|Credit Angel||30 Days||£14.99||See Deal|
|Equifax||30 Days||£7.95||See Deal|
|UK Credit Ratings||14 Days||£19.95||See Deal|
|CheckMyFile||30 Days||£14.99||See Deal|