Everyone should take the time to improve their credit scores. Yes, your credit score will affect your ability to apply for things like loans, credit cards and mortgages, but these days it can also affect smaller things like mobile phone contracts and your eligibility to get car insurance.
The good news is it’s easier and cheaper than ever to check your scores. Companies used to charge either a one-off or a monthly fee for you to gain access to your credit file, but that’s no longer the case. Here are two credit report companies we highly recommend:-
- https://yourcreditreport.org.uk/uk-credit-ratings-review/
- https://yourcreditreport.org.uk/check-my-file-review/
There are now websites you can access and apps that you can download that give detailed information on your credit score that cost nothing to download and nothing to access.
What Even is a Credit Score?
But before we get ahead of ourselves, let’s explain what a credit score actually is. Your credit score is entirely unique to you. It is a list of your current and previous credit agreements such as credit cards, mortgages, store cards, utility bills and car finance, and your score is based on how you’ve maintained those accounts.
What isn’t generally known is that each lender will score you differently based on their own systems, there isn’t just one universal credit rating, but if you have had credit with a bank or a lending company previously, this may go in your favour.
The main thing to realize is, your conduct with existing and previous credit will affect A) if you pass for credit, B) how much you can have, and C) what rate of interest you will be charged.
If you’ve ever been in the position where you’ve been turned down for credit, not only is it embarrassing, but it affects your whole mood and your future scoring. So what can you do to ensure that this doesn’t happen? Let’s go through how to improve your credit score:
How To Improve Credit Score In The UK
There are a number of different things that you can do to improve your credit score in the UK. A lot of them seem fairly obvious, but simplicity and streamlining are the key here. Here’s a list of the Top Ten recommended actions:
1. Check Your Credit File
Before you apply for any credit at all, even a £10 a month phone contract, check your credit score. Checking that all the information that it contains about you is up to date and accurate is imperative. If you do find something that is incorrect, contact the lender and get them to either amend it or remove it.
Inaccurate information can have a real damaging effect on your ability to pass for credit, so make sure that you put yourself in the best possible position first. Here is a link to a credit file comparison website that shows you the best place to sign up to receive this information.
2. Register on the Electoral Roll
This may sound like a strange one, but it just shows the lender that you are who you say you are. By consulting the electoral register, companies can confirm that your address matches up to your application. Also, being at one address for a good length of time will go in your favour as it is seen as a sign of stability.
3. Don’t Miss Payment Deadlines
Pay your bills on time! This doesn’t just mean credit in the traditional sense like a credit card bill or a car finance payment, it also applies to things like utility bills, council tax, telecoms and tv and internet providers as well. Any missed payments can potentially stay on (and damage) your credit file for up to six years.
4. Take Out Additional UK Bank Account
Having two or more UK bank accounts shows more history on your credit file. The more history you create on your credit file the better your scores will be as long as you do not miss payments. Here is the list of best UK bank accounts to sign up with to improve your credit score.
5. Take Out Additional Credit Card
Sounds crazy applying for more credit cards improves your credit history. But the more credit file history you have the better the scores will be on your personal file. Here is the list of best uk credit card providers to sign up with which will start improving your financial history.
6. Disassociate Financially From Others
Not many people realise that their bad debt may be down to someone else’s problem. If you have taken out a mortgage in joint names, or have split from a partner / wife / husband and they have bad credit, it could be this association that is affecting your credit score.
If this is the case, inform the lenders that you are no longer affiliated with this person via a financial dissociation order, which will successfully separate you from their financial ties.
7. Pay Your Debts Faster
Paying more than the minimum payment each month is a surefire way to improve your credit score. This proves to lenders that you are committed and able to make regular payments and that you are financially responsible.
8. Apply for Loan Consolidation
If you are struggling to pay the minimum payments over several creditors then a loan consolidation will help your credit file. The loans will help you repay the several credit providers into one affordable payment so you don’t start to fall behind on payments which can harm your finance history. Here is the best place to apply for a loan consolidation as they compare the best rates to suit your situation.
9. Spread Out Your Credit Applications
If you apply for lots of credit all at once, all you are doing is showing potential lenders that you are desperate. By appearing to be desperate you’ll come across as a liability and your chances of success will plummet. The introduction of eligibility calculators may be one way to combat this.
The calculators do a ‘soft search’ – this means you will see the search on your credit file but lenders won’t. It’s not foolproof, but it does give you some idea as to how you stand before applying and getting a black mark on your score.
10. Take Out a Credit Rebuilding Card
This may seem a little counter-intuitive as the APR on some of them can be extortionate. What these are designed to do is encourage you to spend small amounts on them and pay the balance IN FULL each month. If you do this for six months to a year, you’ll notice a significant change in your credit report.
You must pay the balance IN FULL each month though, or you’re going to get hammered by interest charges and make your score even worse. Here is a link to a credit rebuilding card comparison website that shows you the best place to apply for these rebuilding cards. But please make sure to pay the balance on these in full each month to eliminate unexpected high-interest charges.
11. Take Out a Pre-Paid Credit Card
If the credit building cards are still not an option for you then it might be worth considering a pre-paid credit card. These cards will charge you a monthly fee for using them (usually £5) and you need to pay this fee consecutively for 12 months.
A pre-paid card doesn’t require a credit search because you’re not actually borrowing anything, but it will gradually improve your credit rating. The best website for these is clicking through to this pre-paid card comparison site that gives you plenty of the best options in the UK.
12. Cancel Unused Store Cards
Ironically, access to too much credit is seen as a bad thing in lender’s eyes. Conversely, long-standing credit with one lender is seen as a good thing, so it’s all about striking the right balance. Consolidation is a good way to neaten things up if you have a lot of random bits of credit, otherwise just cancel credit cards you don’t use.
The best ways to build your credit scores is to use these creditors and repay them each month. Many people think not using any credit is good but actually, that is not the case. You can get people who have never been overdrawn or missed any payments with a lower credit score can someone who takes credit regularly and builds a history of taking credit and repaying.
13. Timing is Crucial
This links into spreading out your applications. If you have had bad debt in the past such as bankruptcy or CCJ orders, then hold off applying for new credit until these are due to lapse. Once old credit has been removed from your file it gives you a much more favourable chance to apply for new forms of credit because your history is that much smoother.
If you are currently struggling to repay existing debt there are government-backed schemes that help write off debts in the UK. Check this free debt advice website for more information on this.
14. Lower Credit Utilization Rate
Your credit utilization rate is an important indicator of potential credit risk. Credit utilization rates are based on revolving credit like credit cards and overdrafts. Revolving credit is not mortgages or long-term loan agreements. The instalment payments like mortgages are treated differently on credit scores as scored on a debt to income ratio. Credit utilization rate is a comparison of total credit used to total credit available.
So if you have 50k total credit available and have 10k debts, your credit utilization rate is 20%. The lower the credit utilization ratio the more it helps your total credit score calculation. So, therefore, trying to request a credit limit increase from a credit card issuer is good if approved and trying to keep your total credit allowance below 30% is ideal. This shows credit report calculations you’re doing a good job of managing your debts as not overspending.
So the best solution is to try and get as much credit allowance as possible but then keep your credit utilization ratio below 30% as the lower this percentage is, the better. The total balance-to-limit ratio is the simple formula so get extending your credit limits and reduce your debt levels to lower the total balance-to-limit ratio.
How Long Does It Take To Improve My Credit Score?
This is a bit of a tricky one. It’s like that old adage, ‘How long is a piece of string?’ – the length of time that it takes to improve your credit score depends upon how bad it was in the first place. There are three UK credit reference agencies; Equifax, Experian and Callcredit and they all compile your credit history data, allowing them to send that information to potential lenders. They obtain this information from four sources; The electoral roll, the county courts, an address search, and account data.
Depending on what these searches come back with will determine your overall credit score. These searches will pick up any defaults, bankruptcies, County Court Judgements and payment agreements that you may have had. It will also contain a record of how many searches have been made against you. The reason this is so important is, the severity of the ‘black mark’ against you will determine how long it stays on your credit file for. Obviously, the longer a black mark is on your file, the longer it will impact upon your credit score and your ability to improve it.
Any negative change to your financial situation can have a subsequent knock-on effect and it can take years to rebuild your credit score. Something like a bankruptcy stays on your credit file for up to six years and can have a real impact on your ability to regain a good score again. Any inquiries will remain on your report for two years and some tax liens can stay on there for up to ten years.
There is no magic wand that will build your score back up again instantly, but there are a few ways you can help it along. The first one is self-explanatory; make your payments on time. This shows that you are actively trying to be responsible with your finances. It won’t happen overnight, but it will have a positive effect on your score. The other thing to do is check your credit score for incorrect data as this can have a lasting damaging effect on your credit score. Get it removed as quickly as possible and those credit score numbers should improve dramatically.
How To Improve Credit Score With A Credit Card
This may seem like a strange idea. How can having a credit card improve your credit score? You’re taking on more credit, so surely that should go against you, right? No, not necessarily. If your credit history has been damaged it can be difficult to repair that, and it will certainly take time. A credit card can be a valuable tool to help you but only if it is used responsibly. It is very easy to get carried away and let it spiral out of control and before you know it you’re in a worse position than when you first started.
Let’s start with credit rebuilding credit cards. These cards are specifically designed to allow people to have credit that has a bad credit score but want to rebuild it. Now, let’s be very clear about something here; the lenders aren’t doing this out of the goodness of their hearts. You are classed as a financial liability and they are taking a chance by lending you money. They will help you…but at a price. To offset that liability concern they will lend you money at a vastly increased rate.
What I mean by this is, say your credit rating was good and you applied for a credit card through your bank, you might get an APR rate of 7% or less, which is fairly reasonable. The credit rebuilder card APR rates are much, much higher and are common around the 35-60% mark. The lender might sell it to you as though they are doing you a favour, but they really want you to fall behind on your payments so they can profit from those extortionate APR rates.
The idea is to pay off your balance in full each and every month. This means that if you are using the card, you need to make sure that it is a manageable amount that you can clear when the bill needs to be paid. If you go buying TV’s and games consoles and the like on it you are going to be in a world of trouble. A credit rebuilding card is best used for something like the monthly grocery shop. Just pay for the shopping on the card and use the money you would have used to buy the groceries with to pay the card balance.
But you MUST clear that balance or you’re going to get stung and stung badly with interest charges, and that will see your overall debt level skyrocket. If you can use a card like this sensibly for 12 consecutive months, clearing the balance, then this will have a positive impact on your credit rating. Who knows, it may be enough for you to be able to apply for one of the cards with a much lower APR.
Speaking of regular credit cards, these are also a great way of repairing your credit score if they are used sensibly. You are likely to have access to a much higher credit limit on one of these cards compared to the credit builder type, and this can be tempting. The best way to use one of these cards it to treat it like a debit card. You need to set yourself a manageable budget and try to keep the balance as low as possible or it could end up running away from you. If you can pay the balance off each month, that’s great.
You’ll save on interest charges and it will have a positive impact on your credit score. If you can’t pay the full amount each month make sure you pay at least the minimum amount and on time. This method is a bit of a double-edged sword; paying the minimum amount on time will show that you are responsible with your finances, but only paying the minimum amount looks like you can’t really afford to pay anything other than the bare minimum because you’ve over-stretched yourself and this looks bad. Try to find a sensible go-between and pay more than the minimum payment each month without leaving yourself short. You’ll pay less in interest charges, keep your balance low and the lender happy.
The main thing to remember is always, always pay on time. If you are a bit short one month because the washing machine has blown up and can only pay the minimum, that’s fine, it happens to all of us. Just don’t make a habit of it. Keeping your balance low will improve your credit score no end, and might even lead to an increase in your credit limit at the annual review.
How To Improve Your Credit Score Fast UK
You may have gotten into debt through circumstances beyond your control. Maybe you had been made redundant at work with no sort of final financial package to help tide you over. Maybe your car has finally given up the ghost but you rely on it to get to work and needed a new one as soon as possible which maxed out the credit card. Whatever it is that’s caused your credit rating to slip, don’t worry you’re not on your own. Millions of people receive default notices each year, the trick is to not keep getting them!
Whether it’s something unexpected that happens like the examples above or your credit rating is still suffering a hangover from something like a bankruptcy that happened a long time ago but stays on your report for years, it’s in your interest to rebuild your credit rating as quickly as possible. Believe it or not, some prospective employers look at your credit score before deciding whether to consider you for a job offer. This is why it is so important to manage your credit score and improve it wherever possible. But how do you go about doing this, is it even possible?
Strictly speaking, there is no overnight remedy, no miracle cure, but there are one or two things that can boost it just enough to have a positive impact in as little as thirty days. The first of these things is to check that credit report, check it twice, then check it again. If there are any inconsistencies, old details or old-fashioned mistakes, you need to get them rectified as soon as possible.
Something as simple as writing that you earn £2,000 a year instead of £20,000 a year will have a huge impact on your credit score. It could be that you live in Flat 2C, but your report has you living at Flat 2B and they are actually looking at entirely the wrong address. Perhaps most telling of all is financial links to other people. Maybe you have a joint mortgage with your husband or wife and they have a bad credit history which is bringing yours down.
Maybe you have the same issue with an ex-partner; you’re no longer together but the financial institutes didn’t get the memo for whatever reason. Another reason that is commonly overlooked is a house or flat sharing. If you are still registered as living in a house share even though you moved out ages ago, any bad debt from one of the other housemates will be linked to you through the address alone. Find these problems and correct them by getting in touch with the various lenders and ask them to remove or amend these details. The sooner this is rectified, the sooner your credit score will show signs of improvement.
Another way to improve your credit score fast is by increasing your credit limit. I know, I know, that sounds crazy, but it can work. The thing with this one is that by asking for an increase with someone that you already have credit with, you have a better chance of success than using an external lender. If the request is granted, that will have the knock-on effect of boosting your credit rating. The trick now is not to spend it…
Finally, you can try and negotiate with your lenders. You might see this as going cap-in-hand and begging to your lender, but it’s far better than the alternative. If you have missed a payment for one reason or another, speak to your creditors and inform them of the situation. Creditors are usually happy to waive charges as a goodwill gesture for longtime standing customers. Once the late payment is forgiven, this will boost your credit rating.
If your debt is a little more serious than a one-off missed a payment you could ask your creditors to accept a partial payment from you instead. This shows that, although you are unable to pay the amount that is being asked, you are trying to seek a solution by paying as much as you are able to rather than simply ignoring it. If they agree to your terms, you must make sure that you receive this in writing before you make any further payment. Once you have the agreement, this should see your credit rating improve rather than being tarnished with missed payments.
Utilise Credit Utilisation Ratio
To calculate your credit utilisation then you need to divide your debt levels by your credit limit amount then multiply this by 100 to get the percentage of credit utilization ratio. The lower your credit utilization rate the better this is for your report scores. A low credit utilization shows you’re only using a small amount of the credit you are allocated to spend.
The FICO scoring strategy looks at your credit utilization in two sections. These are the individual utilization of each of your creditors and then the total of all your creditors balances against the total credit limit you are entitled to. If either of these two sections gives a high utilization score then this can harm your credit reporting score.
High utilization lowers your credit reporting scores. It sends signals to prospective lenders that there is an increased risk of you falling behind on further payments. The high utilization ratio means you are close to your credit limits and they are more likely to default or struggle to pay further debts back. So keep your percentages as low as possible and ideally if you can keep the debt levels to less than 30% of your credit limits that is a nice credit utilisation score.
How To Improve Credit Score Immediately
If it’s not enough to see a relatively quick improvement in your credit score, then what can you do that would make an immediate impact on it? You can, of course, make your minimum payments on time. As soon as that payment is made it automatically increases your credit score because you have stuck to the terms of the agreement you made with your lender. This also has the advantage of being an ongoing benefit. Keep those payments coming in on time and that credit score will keep rising and rising.
Linked to this is another suggestion that seems obvious once you think about it. Instead of paying your bill once a month, pay twice a month instead. Let’s say, for example, that you have a credit card with a £500 limit on it, and every month you use the full £500. By sending in a payment of £500 once a month, yes you are paying on time and yes you are clearing the balance, but lenders will view this as high credit usage.
To them, it looks like you need to use that amount every month and it might actually go against you. Now, if you pay £250 at the start of the month and £250 at the end of the month, that takes your credit usage down by 50%. Make sense? It’s a bit of a sneaky loophole, but it shows that you are a regular payer, who pays more than the minimum every month and doesn’t max out the card every month too. You could go one step further and split it into three payments. However many payments you decide to split it into, you are constantly chipping away at that final balance and bringing your card utilisation down, which will have an immediate impact on your credit score.
Another way to fortify that credit score immediately is by reducing your debt to income ratio. By increasing your income by paying off an outstanding debt source you do two things; 1) you leave yourself with more disposable income, as the money you would have used in the form of payments towards that account is now surplus, and 2) you now have less debt so your credit score will increase.
A slightly riskier option is to open up a new account. You could try to get an increase in your credit limit with your existing provider, and this may be enough to give you what you need. If they turn you down, however, you do have the option to look elsewhere. Generally speaking, you are more likely to get credit with a company that you already have dealings with.
If you do go elsewhere they will have their own system for running a credit check on you – this can either work for you or against you. If it works, then great, your credit score will immediately look healthier. Just be aware that you may also get declined and this won’t do much good for your credit file.
There is one other final way you could improve your credit score immediately but it requires a lot of trust and respect; you could become an authorised user. This basically means finding somebody who will let you share their account, and therefore, their credit score. As long as a card has been issued in your name, that account will show up on your credit score and give it an instant lift. This option might not be for everyone and like I say, it takes a lot of trust and respect from both parties, but it can work if you need that credit score boosting immediately.
How To Improve Credit Score From Fair To Good
So your credit score is ‘Fair’ but you’d like to improve it to be ‘Good’. How do you improve your credit score from ‘Fair’ to ‘Good’? It all depends on where you start, really. You see, because there is no universal credit rating system as such, your credit rating is just an approximation of all the available data. So if Equifax say you have a fair credit score, you might be a few points up or below the figure that they have given you. This could play significantly in your favour as one lender might consider your score better than another lender. It can obviously also have the opposite effect, so it’s a good idea to see if you can play the odds a little safer by increasing that score by a few more points.
Regardless of what your numerical score is at the moment, the way to progress to ‘Good’ from ’Fair’ is exactly the same. Why would you want to do this in the first place, for a few measly points it doesn’t sound like it’s worth the effort? The difference between ‘Fair’ and ‘Good’ could be the reason you are not accepted for a mortgage. It might be the difference between being accepted for a credit card with 0% interest, or being offered one but with a much higher APR.
A ‘Good’ credit score will allow you the freedom to have a wider range of options to choose from when it comes to deciding what sort of credit you want to have instead of being restricted to just one or two choices. Put simply, the better your score, the more options you have and the better those options become. Now, do we have your attention?
To put this into action there are a few things that you might do. The first thing that is recommended is to check your credit score to find out what may be affecting it, especially if you’re not sure why it is low in the first place. Your credit report should give you both the positives and the negatives behind the outcome of its decision, and it’s those negatives that you can get to work on. If there is any old information that is no longer relevant or current information that is incorrect, this can affect your score.
It’s not outside the realms of possibility that there are details that are on your credit file that entirely unconnected to you. For example, there may be someone the same sex as you, with the same birthday and the same name, but their last name is spelt ‘Davies’ and yours is spelt ‘Davis’. Innocent little mistakes like that can make a huge difference to your ability to apply for credit.
Secondly, you could try to shift the balance of your existing debts. It’s all to do with how you utilise your credit accounts that has the biggest effect on how your credit rating is decided. So for example, let’s assume that you have two credit cards and both credit cards have a limit of £1,000 each. You use one of the cards all the time because you get points and all sorts of great bonuses for using it, and although you’re making payments on time it’s constantly maxed out.
The second card doesn’t get used as much and there’s a balance on there of £500. Combined you have an overall debt of £1,500. The way the credit agencies will see this is not, ‘This person has maxed out one card but the other one has plenty left on it’. The way the credit agencies see this is simply, ‘This person is using 100% of the available credit on this card. This person is a potential liability’.
The smart way to get around this is to spread the debt across the two cards evenly, £750 on one and £750 on the other. This way the credit agencies look and see, ‘This person only uses 75% of their available credit, they organise their finances well, they are a good proposition to lend to’. To be clear, 75% is still a very high usage, but it’s a lot better than 100%. It sounds simple, but it’s an easy way to improve from a ‘Fair’ score to a ‘Good’ score.
The last thing you could do to improve your credit score is to apply for new credit. This could be with your existing lender, which usually gives you a small advantage, or from somewhere completely new. The thing to remember with this method is that is you have a ‘Fair’ rating, you will get offers from potential creditors, but the products they will offer will be fairly limited and they will more than likely be a higher interest rate. It’s the whole ‘speculate to accumulate’ scenario; you have to apply for finance with a higher rate because you’ve no other choice, but you know that once you are accepted it will increase your credit score. All you have to do is maintain it responsibly.
How To Use Credit Card To Improve Credit Score
Another trick to use when trying to improve your credit score is by using your credit card. Yes, you read that correctly, use your credit card. I’m not suggesting you go on a spending spree with your flexible friend, quite the opposite in fact.
If you want to improve your credit score by using a credit card then you have to stop thinking of it as a credit card. When you use a credit card, the balance goes up. When you use a debit card the balance goes down. It’s all too easy to keep handing over the credit card when the money doesn’t dwindle down like your current account balance does, and it can lead to serious problems if it isn’t kept in check.
Basically, you need to try and have the mentality that your credit card is a debit card and your usual debit card doesn’t exist; just use the credit card to pay for low cost things like a magazine or a family meal instead of your debit card. Once you have paid for these items using the credit card, immediately pay that same balance off your credit card bill using your debit card. This way of utilising the credit card allows you to build up a really good credit score because it shows that you can use it responsibly. It doesn’t matter that you might only spend £30 a month on a card that has a £3,000 limit, what does matter is that you are conducting it in the right manner.
If you don’t have the option of doing this because you don’t have an existing credit card, then there is one other option that you might try. It’s along the same lines but you have to be ultra-disciplined or it could turn out to be more of a hindrance than a help. Credit rebuilding cards are the perfect way to build up your credit score if you can’t get a card via traditional means.
The way these cards work are exactly the same as a regular credit card, although it will most likely have a much smaller credit limit. The caveat with these, however, is that the APR rates will be many times higher than a conventional credit card. There are cards on the market that have an astonishing APR of 60% and above! If you pay the balance off every month then you have nothing to worry about, you won’t be charged a penny’s worth of interest.
Keep this up over a sustained period and in no time at all your credit score will show steady signs of recovery. If you don’t pay the full balance off then that’s when you start accruing interest based on that monster APR figure, and your balance will shoot up while your credit rating goes in the opposite direction.
If you do choose this method you have to be strict with yourself. You must pay your bill on time, you must pay the full amount and you must stay within your credit limit. Any deviation from these three simple rules can result could potentially result in you creating a very potent financial mess. Play the game correctly, however, and it’s a surefire way to bump up your credit score from an unfavourable position.
How To Improve Poor Credit Score
It’s always a bit of a shock if you come to apply for credit and you either get turned down flat or are only offered limited products with high interest attached to them. Being refused for credit is, well, just plain embarrassing, and surveys have revealed that people would be more comfortable revealing their weight rather than their credit score.
That’s how sensitive this can be. What can you do to try and avoid this? The difference between a ‘Fair’ credit score and a ‘Good’ credit score might not be as elusive as you think, and it can be achieved by just changing your habits a little bit and having more of an understanding of how the scoring system works.
It’s in everybody’s interest to keep on top of their credit score because it affects more aspects of your life than you might realise. Of course, your credit score is important for things like applying for a mortgage or a big loan, but even your gas and electricity suppliers can have a serious say in your credit score, especially if you are in arrears to them. Everything that you have that requires a regular payment is classed as credit; your mobile phone, credit card bill, utilities, car insurance, life insurance, and so on and so on.
The way that you handle and maintain these accounts will play a huge part in deciding your overall credit score, but other factors are also considered. Your credit score takes a number of things into account; 1) the information you give on your application, 2) your credit file, and 3) your credit history. These three things combined will determine if you pass for credit, how much credit you can have, and what products and rate of interest you will be offered.
If you want to give yourself the best possible chance of having more options and a better credit score, there are a number of things you can do. Some are fairly obvious, others seem like an odd idea, others are just plain sneaky, but all of them will help.
The first one is obvious but it’s also linked into something else; paying your bills on time and IN FULL. Yes, I know you could have figured that paying on time one out for yourself, but people don’t realise how long a defaulted payment can stay on your credit file for and how much it can hurt your overall score. Enquiries into your credit history alone stay on your file for two years, imagine what the odd missed or late payment here or there could do. By making your payments on time you are perceived as being a responsible lender and this will have a positive effect on your credit score.
Linked in to this is minimum payments – yes it’s good if you make the payments on time but only paying the minimum payment can actually have a negative impact. For one, you get stung for interest charges, and two, you actually look like you’re struggling to lenders. If you are in the position to pay your balance off every month then your score should get an a significant boost. This is because there is no better way to show the creditors that you are on top of your finances than by having a clean slate every month. Sensible utilisation of your credit is the number one way to improve your credit report score quickly.
Speaking of credit reports, when was the last time you looked at yours in depth? This could be the cause of some of your financial issues without you even realising it. You need to check it thoroughly for any information that is either no longer relevant or incorrect because it could be dragging your overall score down. Financial links to an ex-partner, changes of address, and mistakes on your personal details are all things that can negatively impact your score.
Imagine a pair of identical twins living at the same address, one named Paul Brown and one named Peter Brown. Paul has bad credit, Peter does not. What happens if Peter applies for credit under the name P. Brown? There’s a good chance he could be mistaken for his brother and get refused credit. This is why it’s essential to make sure that your credit report is correct. If it’s not, contact the relevant creditor and get it changed immediately, and this will have a positive effect on your overall score.
Let’s assume that you checked your credit score, everything is correct but your score is still pretty rotten. You get home from work and, bang, your cooker decides to pack up. How can you get a new one if your credit score is bad? You were made bankrupt recently and that is going to stay on your credit file for six years. You have had to cut your credit card up as part of the bankruptcy, so using that is no longer an option. What’s your next move?
Fortunately, there are a few things you can do that will allow you to obtain credit and improve your credit score too. The first of these is a credit building card. Being perfectly honest here, a credit building card is for people in just this type of situation. You’re a high risk case, so if someone is going to be willing to lend you money, they want paying for the privilege. Credit building cards usually have a low credit limit on them but their interest rates will be really high.
That’s okay though – if you use it properly. You see, if you pay the full amount each month you don’t pay any interest at all, it’s only when you don’t that you’ll start getting hit for all that interest. Keep this up regularly and your credit score will soon take a turn in the right direction. Okay, time for one of those sneaky methods I mentioned before; pay twice.
Before you recoil in horror, I’m not suggesting that you pay double. If you’re in the situation above then you’re probably not in the position to anyway. What I’m advising is that you split your payment in two; you pay half a few weeks before the due date and the other half just before. This has two effects. Firstly, it looks like you’ve only used half of your available credit for most of the month instead of all of it, and secondly, you look like a conscientious payer who is actively trying to reduce their balance as much as possible. So not only have you paid on time, you’ve also made an extra payment and cleared your balance.
If you are not able to apply for the credit building card there is one other thing you could try. It’s not an overnight fix but it does have a positive impact on your credit score. Pre-paid credit cards have been around for a while now, and they are perfect if you are trying to salvage your credit score. There’s usually a small administration fee to pay each month, around £5, and you just deposit however much money you want to use onto it. Because you’re not actually applying for any finance, there’s no credit check, but if you use it wisely and keep paying the admin fee consecutively for 12 months, then this will improve your credit score.
How To Improve My Credit Score For Free
Everyone could benefit from a better credit score. A better credit score means that you qualify for lower interest rates and better terms. If you don’t have a good credit score but want to improve it, then don’t worry, there are a number of ways to improve your credit score for free and most of them are pretty common sense. A lot of them just involve asking nicely!
The first thing to do is to check your credit report. This is very easy to obtain, you can have it almost instantly and it’s completely free. Once you have your report you need to check it for any inconsistencies like wrong current address, wrong spelling of your name, financial ties to someone that no longer apply, and previous charges. All of these things can have a detrimental affect on your credit score and they need to rectified or just plain wiped out as soon as possible.
The issue of charges should be something that you try to contest. These lenders make thousands if not millions of pounds in profit every year – are they really going to feel a £12 charge? They might not, but you will. It might seem like an insignificant amount, but it’s the lasting damage that it can do to your credit report that you should be concerned about. Any kind of default automatically goes on your credit file and can stay there for a number of years.
Imagine how sick you’d feel if you got declined for a mortgage because you paid a few bills late a while ago and you were too busy to be bothered contesting those late payment charges. Call your credit provider up and speak to them. You’ll find that they are pretty reasonable with long standing customers and are happy to wipe off the odd late charge here and there to keep your business. The difference this will make to your credit score cannot be understated, and it doesn’t cost a thing.
Another strategy you could try is to raise your credit limit with an existing lender. It’s worth saying that this is only free if you have the willpower not to use it or can clear the extra balance every month. This might seem a little bit odd, having more credit to give you a better score, but it can definitely work. It’s all down to how you compose yourself when it comes to using the available credit limit that’s the real trick. If you have a credit card with a limit of £1,000 and a balance of £600, you’re using 60% of the available credit limit.
Anything over 50% is considered high usage, and therefore this can go against you on your credit report. If you call your card provider and ask (nicely) for a credit limit raise and are accepted, your usage of the available limit automatically drops. So, if they raise the limit to £2,000 that £600 only equates to 30% of your overall balance and your credit score will see an instant improvement. The only thing you have to do is not get carried away with this availability of new credit. Strangely, if you think your credit limit is too high and you voluntarily reduce it, this can go against you.
If you are able to, take a new credit card or loan. This runs along the same principle of asking your existing provider for a higher credit limit, but having multiple credit accounts that you manage well can also have a positive influence on your credit score. Try to shop around for the card or loan with the best possible terms, such as 0% APR, or a great balance transfer rate, that way you’ll spread your credit more evenly.
This has the added bonus of bringing one of your card balances right down, and this will add a few more points to that already-improving credit score. Again, all of these methods are free, they just require maybe 20 minutes of your time. Isn’t that time well spent if it can improve your credit rating?
How To Improve Credit Score After Bankruptcy
There are a number of circumstances that might lead somebody to going bankrupt but in the end, the reasons are all the same; they have hit a financial wall and can no longer afford to keep up with their financial commitments. Going bankrupt is a difficult thing to go through, personally. For a start, you have to pay to go bankrupt, which seems silly when the reason you are going bankrupt is because of a lack of funds!
The worst thing about it though is the detrimental effect it has on your credit file. Most people who go bankrupt are discharged after a year. That means that after a year the bad debt is declared null and void and the creditors cannot ask you for any further payment. However, it doesn’t end there, the bankruptcy stays on your credit file for a further five years.
Six years is a long time for anybody, especially when it comes to applying for finance. So what do you do if during that six year period you want to apply for finance or credit? You may not want or need it for a specific purpose, but you just want to make your credit score a bit more respectable again. Bankruptcies and IVAs, along with CCJs, are some of the most serious ‘black marks’ against your credit file that you can get.
They are a cast iron record that you have seriously defaulted on your financial commitments and are unable to control your finances. In short, you’re considered a liability for the foreseeable future and you’re going to find it incredibly hard to find someone to take a gamble and lend you money. The ones that are willing to take a chance on you will want paying handsomely for it, and interest rates can be astronomical.
The good news is, even though it may be hard it’s not impossible, far from it. You just have to be a bit wiser with the decisions that you make and really search for the best available product. Timing is everything – don’t expect to go bankrupt on a Monday and be able to apply for new credit on Tuesday, it doesn’t work like that. It takes a bit of time and patience and careful control of your budget.
Start with something simple. Paying your bills on time will help your credit score to recover more than you realise. Your credit score is largely based on your ability to live within your means and pay your bills on time. Any defaults while a bankruptcy is still on your credit file could be disastrous, and any attempts you are making to repair it could be all for nothing.
It might not feel like you are having any impact by doing this, but you are. Regular, up to date payments on everything from your internet bill to your car insurance will all count towards repairing your credit report. If you can do this for a sustained amount of time you will find it much easier to apply for a loan or credit card with a small credit limit twelve months down the line.
If you are able to, it’s never a bad thing to open a savings account. Some banks will not let you open a new account after bankruptcy, but the majority will let you open a basic savings account as there’s no risk involved to them. Just try to put something away each month, and this will show that you are trying to get your finances under control and safeguard against further financial difficulties in the future. You may not be able to save much, but it all helps to rebuild that credit score.
The first thing you can try if you actually want or need credit is a secured credit card. This is where you deposit an amount into a savings account and that deposit secures the card. Essentially, that amount becomes your credit limit. What you need to do with this type of card is thoroughly read the terms and conditions because some of them have all sorts of fees and charges attached that could chip away at your deposit.
If you manage the card well this will increase your chances of applying for an unsecured card in the future. In a similar vein, you could also try a credit rebuilding card. These work in much the same way as a regular credit card other than the interest rates are much higher. If you pay the balance back in full each month then they can be an extremely effective tool to rebuild your credit rating, but don’t get sucked into a situation where they start applying the interest or you’ll be in a pickle again.
Finally for credit cards, if neither of those options are viable you could always get a prepaid credit card. There’s no financial risk on the part of the provider because you’re not actually taking out any credit – you just pay them a monthly fee of around £5 and then top up the card with however much you like. Keep paying the £5 a month consecutively and after 12 months you should see your credit score numbers start to rise again.
How To Improve Your Credit Score As A Student
It’s a running joke that students are always broke. It’s a standard cliche that they spend their student finance money on going out and having a good time and have to spend three or four years of their lives eating cold baked beans out of the tin as a result. Cliche or not, being in debt as a student is as serious as being in debt for anybody else. You still have to eat, to get to lectures and work and you still have bills to pay.
For a lot of students, it’s the first time they’ve had to be financially independent and it can all seem a bit too much and get on top of them. Keeping a good credit score as a student needn’t be hard though, it’s all a matter of self control.
The main financial trap that students fall into is through being financially attached to other people. As a student, this is so easy to do because of flat and house shares. As a part of that communal house, you are responsible for your share of the bills like gas, electricity, rent, tv license, and internet. This is on top of your own personal outlay for food, travel and personal finances like mobile phones.
If you are named on any of the shared accounts then you share the credit files of those other people, so if you apply for credit and get knocked back even though you have a fairly good credit rating, chances are it’s one of your housemates that’s holding you back. If it’s possible, try to remove yourself from these communal accounts and find an alternate way for you to pay your share. There are plenty of free apps that let you split bills equally, so see if you can do this instead as it will detach you from the other people’s toxic credit and improve your own.
Another thing you can try is to ask The Bank Of Mum And Dad. This isn’t like where you call them up and ask for a tenner because you’ve run out of baked beans, this is a legally binding financial agreement. If they consent to it, you could be an authorised user on their credit card. As long as you get your own card with your name on it, when a credit check is done your parent’s credit card account will show up on your report.
Obviously, the reverse is true, so if you start spending like crazy on your card and don’t keep up with the payments you will drag your parent’s credit score down as well as your own. This method is a great way of boosting your credit rating but you have to be uber careful with how you use it. Not only can it be tempting to abuse your parent’s credit card, but it can have a damaging effect on your relationship with them if you are irresponsible with it. Think carefully before choosing this option.
Of course, you could always try to take out a credit card of your own. Chances are you will be working while you are a student and you will have a proof of income and proof of address so you could apply for your own. Many providers have credit cards that are specifically tailored towards students and you may find that these work to your advantage more than a regular credit card might.
Finally, this last tip could improve your credit score but only indirectly. You’re a student; most places offer student discount if you have a valid NUS card so take advantage of it. The more you can save using the NUS card, the more disposable income you have. If you have a more disposable income you could open a savings account and save it or you could pay more off your credit card. Both of these will raise your credit score. With that extra money, you could even take out a contract for a better mobile phone. That way you can use it to ring home and ask Mum to bring more beans the next time she comes to visit…
How To Improve Your Credit Score After An IVA
An Individual Voluntary Aid (IVA) is similar to bankruptcy in that you cannot keep up with your financial commitments and have to come to some other arrangement with your creditors. IVAs are typically only available to those who have debts of £5,000 or more. Unlike a bankruptcy, an IVA means that you have some disposable income at the end of the month after all your bills have been taken into account.
Based on however much disposable income is left, you and your creditors will agree on a figure that you can realistically afford to pay back over a certain length of time. This time span is usually five or six years but can differ depending on individual circumstances. Once a figure and time scale have been agreed, then all interest and charges are frozen.
At the end of the agreed time scale, any remaining debt is wiped off and you are debt free. This can take your monthly outgoings down by as much as 70%, but much like the bankruptcy path, it will stay on your credit file for six years regardless of whether you pay it off early or not, and it will have a damaging impact on your credit score.
With this staying on your report for such a long time it will definitely affect how you can apply for credit and what terms and conditions you are offered. It’s understandable that after going through an IVA you might want to stay as far away from debt as possible, but a small amount of controlled debt is highly beneficial. You will find it easier to obtain credit once the six years has elapsed, but the good news is that having an IVA doesn’t completely stop you from having credit. Here are some of the steps you can take to improve your credit score after an IVA.
After a few months has passed since the completion of your IVA, obtain a copy of your credit report. This can easily be done online or by post and usually only costs a few pounds. The Insolvency Service should have updated your details but it’s always a good idea to check and make sure. If there is an error then you can challenge it and have it removed. This will have the immediate effect of improving your credit score and your chances of being approved for finance with better terms and conditions.
One thing to definitely NOT do is take out a payday loan. The average APR on them is astonishing and even though they are usually only very short term, they reek of desperation to any potential lenders. Small, steady steps is the key here, not quick fixes.
The best thing you can do is apply for a credit card with a low credit limit and use it as a debit card. Don’t go silly and start spending like there’s no tomorrow, just use it for small purchases like the weekly shop and pay it off straight away. This is low risk, sensible money management, and it’s just what creditors want to see if you’ve had a bad credit history.
You may have to go for a credit card that has a fairly high APR, but if you are planning on paying off the balance every month then it doesn’t matter at all, it won’t affect you. The main thing is to keep paying payments on time, pay the full amount, and your credit score will improve to the point where you can apply for something better.
How Long Does It Take To Improve Credit Score After Debt Settlement?
Technically speaking, you don’t have to wait until you’ve settled your debts to improve your credit score. You’ll find it much more difficult to do it if you have a lot of debt, but it can be done. The word ‘debt’ has many negative connotations with it, but it need not be a bad thing. A contract mobile phone is something that you pay for monthly, hence, it is a debt. But if the account is managed sensibly then it can raise your credit score rather than hinder it.
Of course, some debt can have a lasting effect even after it has been settled. For instance, something like bankruptcy means that your debt is settled after 12 months, but it stays on your record for a further 5 years. There’s no set timeline for how long it takes to improve your credit score, and this is basically down to the system that is used to grade credit scores. Each lender has a different scale to measure you on, so what is deemed low at one provider might be perfectly fine with another.
The thing to try and do is keep your nose clean while you have debt, by paying your bills on time and not defaulting on any of them. This is equally important for all credit accounts that you have, as each one has the same consequence; a bad credit score. Once the debt has been settled you are free to shop around for an alternative credit method, but choose wisely.
If you do too many searches at once you’ll just look desperate and if you fail too many searches you’ll be back at square one. Try to give yourself some breathing space when applying – don’t celebrate a debt settlement by taking out new debt the same week, give it a few months to give it a chance to show up on your credit report, then apply. How you conduct yourself both during and after you have settled debt will determine how long it is before your credit score improves.
You should pay your bills on time, spend frugally on credit cards and try to keep the limit as low as possible. It sounds obvious and kind of boring, but it’s the easiest and fastest way to improve your financial position after debt.
How To Improve Credit Score For A Home Loan
Getting a home loan, or a mortgage, is one of the most important decisions a person ever has to make. It’s undoubtedly the most expensive decision a person will ever have to make, so it needs a lot of research to give you the best possible outcome. But the research shouldn’t purely be on what mortgage to take out, you should direct a lot of attention to your credit report too.
You need to do this a minimum of six to twelve months before you even consider looking at houses and home loans, as this will give your credit score ample time to be in the best shape that it can be. The worse your credit file is, the less chance you have of owning your own home.
The first thing to do is request a copy of your credit report from the last twelve months from all three of the credit reporting agencies; Equifax, Experian and Callcredit. The reason you need all three is because they will not be exactly the same, as some creditors only send information to one or two of the agencies instead of all three and you need to know what is on every one. This way you can solve any problems on them before that crucial home loan search goes through.
The mortgage package you will be offered stems from what the three reports say, so they need to be the best they can be.
To improve on what the reports say you need to focus on the negative aspects of it and start turning them around. If you have late payment charges, call up your creditors and query them. If you have any information that is wrong or no longer applies to you then it needs to be dealt with as soon as possible. If you are not making payments on time through sheer forgetfulness then set up a direct debit to make sure they go out on time.
The number one factor is determining your credit score is if your bills on time. If they are paid on time, are you paying enough? Never just pay the minimum amount, always try to paid more even if it’s just a little. Paying your balance off each month will be a huge help, but if that isn’t a realistic option for you, see if you can open up a new credit card and split the balance across the two cards so it looks like you have a smaller card utilisation on them.
All of these methods are tiny little tweaks as to how you should normally deal with credit, but each one of them will add precious points to your credit score and make that dream of home ownership a little more real.
How To Improve Your Credit Score In 24 Hours
You’d be forgiven for thinking that taking out a payday loan and paying it back within 24 hours would be a surefire way to bump up your credit score overnight, but you’d be wrong. Yes, you are abiding by the terms and paying it back on time, but payday loans are considered a black mark against your name, purely because they are considered to be the last resort of somebody with severe financial problems.
That’s not to say that that is the case with all credit providers though. There is a strong case to be said for taking out a small loan that you don’t actually need with one of the more mainstream providers. Because you have been accepted for credit your credit score will take a jump upwards. Once that has happened you can pay it back within a month or two and your credit score will retain that spike that you saw initially.
Another way of improving your credit score in 24 hours is to bring down balances that are close to their limit. Let’s say for arguments sake that you have a credit card with a limit of £2,500 and that you have a balance on it of £2,000. This means that you are using 80% of that card’s available credit. Anything above 50% is considered high and around 30% is the norm.
So, if you pay £1,250 off that card it would still leave you with a balance of £750 but you would only be using 30% of the card’s available credit. This will see an instant jump in your credit score because 1) you’ve made a large payment, and 2) you’ve brought your overall debt tumbling down.
In direct opposition to the last point, you could actually ask for more credit to see a spike in your credit rating overnight. By contacting a lender who you have current credit with and asking them to extend it, you can send your credit rating through the roof. This goes back to the utilisation theory again.
If you have a £2,000 limit and a £1,500 balance you are using 75% of the available credit limit. If you keep your balance at £1,500 but increase your credit limit to £3,000, you are only using 50% of the available limit. Make sense? By increasing your available credit, you’re actually decreasing the card utilisation, and that looks good to the credit companies.
As well as being able to do quick fixes like this to your credit score, you can do so much good for it in 24 hours by doing things like checking your credit report to see if it’s up to date, paying your bills on time, and closing down old accounts that are no longer used, but the tips above should see an instant spike in your credit rating should you need it.
How Long Does It Take Credit Score To Improve After Paying Off Debt?
There’s no right or wrong answer to this question because it depends on so many different factors. Debt is a uniquely individual thing, from the reasons to why we have it, to how much we have. The financial institutions that determine our credit score use different methods to see whether we meet their criteria for lending, and this affects what rate and product they will offer us.
Different types of debt have different lengths of time for affecting our credit scores. A missed payment charge may continue to hound you for up to two years, whereas CCJs have an even longer lasting effect on your credit file, staying on there for six years.
There is no set timeline to recovery as such, but there are things that you can put into place that will help your credit score to recover quicker rather than if you did nothing at all. This mostly includes being sensible with your money and not making the same old mistakes. Generally speaking, your credit report is updated every 30 days and takes everything into account that has happened during that time period.
So, if you have paid all your bills on time, not been refused credit, perhaps paid an outstanding debt in full, or have been accepted for new credit within that time frame, it will have a positive effect your score. If you have been declined for new credit, applied for too much credit all at once, missed payments or have gone over your allowed balance, then these will all have the reverse effect on your score.
The fastest way you can increase your credit score is by being boring and paying things on time. Sign up to direct debits and standing orders so that payments are not missed, tick the option that gives you text message alerts and email updates when payments are due, just give yourself every opportunity to be on the ball when it comes to organising your finances. If you can do just that then your credit score will improve a lot faster and your options will become more appealing and available sooner rather than later.
How To Improve Credit Score For Mortgage
Buying a house is the perfect mixture of excitement and fear. Excitement, because you get to buy your own place, and fear because, well, you’re buying your own place! With a purchase as big as this and long-lasting financial implications based on the strength of what mortgage package you are offered, it makes sense to make sure that you can make as many improvements to your credit score as possible.
The best way to do this is to start early. Don’t try and do this a week before you sign on the dotted line or you won’t have given your credit score the chance to improve in time. Ideally, you need to start planning this a full year in advance to take full advantage of the changes you’ll be making. The first important thing to do is to get a credit report from all three of the credit reporting agencies. These should only cost around £2 each and they are vitally important to getting your report 12 months down the line into shape.
You won’t get your credit score included in this, but it’s the details of the report that are of interest. Once you have it, scour it with a fine tooth comb for any and all incorrect information because the slightest little inconsistency could mean the difference between a good mortgage rate and a really good mortgage rate. If there are any mistakes then dispute them and get the misinformation removed before it can damage your score any further.
The next thing to do is to try and reduce your debt-to-income ratio. This means getting rid of as much debt as possible, ideally to about 10% of your income. Don’t take out any new debt either as it will undo all your hard work reducing the bill. This is obviously really hard if you’re buying a house as there’s so much to buy for it, but you have to keep that spending under control to see the benefit in your mortgage rate.
Finally, and fairly obviously, keep making your monthly payments on time. This is everything from your life insurance to your car loan to your Sky TV package. Just one default could have serious consequences for you later on. It doesn’t matter how much you’ve defaulted by, the point is you defaulted and that puts a big, black mark on your credit score that’s hard to remove quickly. Just keep plugging away, on time and that house will be yours before you know it.