How to improve your credit score

Person at laptop with credit card
Pexels
Jessica Bown9 February 2021

If you want to borrow money, you’ll need a good credit score to access the best deals.

Whether you’re applying for a credit card, looking to get a mortgage to buy a house, or searching for a loan, you’ll find the cheapest, most attractive offers are reserved for those with high credit scores.  

And if your score is low, you might also find it hard to find a mobile phone contract, get insurance, or even rent a home.  

But how do you earn a high credit score? And what can you do to improve a low score?  

The good news is that you can check and monitor your credit score using free online services.  

Find out how to do that, and learn more about the steps you can take to increase your credit score, with our short guide.

What is a credit score?

Your credit score is a three-digit number that represents the value of your credit report.

It’s calculated using a points system based on how well you manage your money – and the higher the number, the more attractive you should appear to lenders.

The maximum number of points you can have depends on the credit reference agency that compiles the report.

There are three main credit reference agencies in the UK: Experian, Equifax, and TransUnion. Experian calculates your score out of a total of 999; Equifax’s top score is 700; and TransUnion’s is 710.

Either way, the closer your score is to that top limit, the better your chances of being accepted for the best credit cards, loans, and mortgages.

What is a good credit score?

As explained above, what constitutes a good credit score varies between the different credit reference agencies.

If it’s a score calculated by Experian, it will be considered excellent at 961 or more, good at between 881 and 960, and fair at 721 to 880.  Anything below that level is considered poor, which will mean you are seen as high risk by lenders and other institutions.  

If Equifax sets your score, anything between 466 and 700 is excellent, 420 to 465 is good, between 380 to 419 is fair, and anything below that is poor.

TransUnion credit scores, meanwhile, are excellent at between 628 and 710, good at between 604 and 627, fair between 566 and 603, and poor at 565 and under.  

Compare Credit Cards

Find the right card for you without affecting your credit score.

Compare Cards

So I actually have three credit scores?

Yes, all three credit reference agencies will generally keep a file on you, meaning you have three separate credit scores.  

Which one determines whether or not you are offered a credit card or loan will depend on which agency – or agencies – the lender concerned uses.

The good news is that credit reference agencies use similar information to calculate their scores, so any action you take to improve your score with one agency is likely to lift your score with the others too.

However, it’s still worth checking all three of your credit reports from time to time, just in case one contains errors that don’t appear on the other two.

How can I get a good credit score?

It’s not rocket science; the best way to earn a good credit score is to manage your finances well.

For credit reference agencies and financial institutions alike, that means:

  • Paying your bills on time 
  • Staying within your credit limits 
  • Not maxing out your credit cards 
  • Not making too many credit applications in a short time.

Example: With Experian you’ll lose 130 points for paying a bill late, and gain 90 points if you reduce your credit card debts to 30% or less of your overall credit limit.

It’s not all down to how well you manage your money, though.  

If you’ve never borrowed money before, for example, your credit score will be low because there’s no evidence of whether or not you can stick to a repayment plan.

And even if your financial history is spotless, other factors can damage your credit score.  

These include:

  • Changing address frequently
  • Not being on the electoral roll 
  • Being a victim of fraud
  • Failing to spot errors on your credit file.

If your financial situation is linked to someone with bad credit – for example an ex partner who goes bankrupt – your score can also be impacted, in which case you need to ask the credit agencies to apply a notice of disassociation to ensure their future actions do not affect you.

How can I check my credit score? 

You’re entitled to one free copy a year of each of the three credit reports the different credit reference agencies hold on you.  

To claim them, all you have to do is visit the Annual Credit Report website.

The reports you receive will not show your actual score, but reviewing them is the best way to spot any mistakes or areas where you can take action to improve your score.

To see your scores for free, you can sign up to a free 30-day trial to Checkmyfile. Just remember that unless you cancel your subscription within the first 30 days, you’ll pay £14.99 a month for continued access.

How can I improve my credit score?

Steps you can take to improve your credit score include:

  • Checking your credit report before applying for credit to avoid damaging it with rejected applications 
  • Registering to vote, as this helps lenders confirm your name and address via the electoral roll 
  • Paying your bills on time – for everything from your mobile phone to your council tax 
  • Taking out a credit card aimed at people with low credit scores and paying it off in full every month
  • Reducing the balances on any overdrafts or credit cards you already have to bring down your “credit utilisation ratio”

How do lenders use my credit score?

Lenders check your credit score to get an idea of how trustworthy you are. But credit scores are just one of the sources of information they consult when considering whether to lend you money and at what interest rate.

They will also consider the information you provide as part of your application – for example about how much you earn.  

And if the loan you’re requesting does not meet their affordability checks, you won’t be offered it no matter how good your credit score.

If you are an existing customer, or have been a customer in the past, they will also take that relationship into account.

Does a good credit score mean I’ll always be offered credit?

Having a good credit score undoubtedly raises your chances of being offered market-leading deals on credit cards, loans, and other financial products.

But companies are in the business of making money. So however high your credit score, they may sometimes reject your application because they do not expect to make a profit from you.

For credit card providers, the best customers are those who always pay on time but never clear their balances in full.  

So if they see that you clear your balance every month, or switch from one 0% card to another to avoid paying interest, you may find your application is rejected despite your excellent credit score.

Compare Credit Cards

Find the right card for you without affecting your credit score.

Compare Cards

MORE ABOUT