2022 – How to Improve Your Credit Score | Borrowing and debt

Understand your review

Before considering how to improve your credit rating, it is important that you understand exactly what it is and how it is used.

Banks and other lenders look at your credit eligibility when deciding whether to approve a loan application—whether it’s a loan, credit card, or new mobile phone contract.

There are three major credit bureaus in the UK: Experian, Equifax and TransUnion. They contain data about your financial history, such as b. Your pre-existing debt, known on your credit report.

This report is then used to generate a score showing your credit worthiness. Each referral agency has its own numbering system, but the higher the score, the better, and the more likely your loan application will be accepted.

Your score can also affect how much money you can borrow and the interest rate you will be charged for it.

Review reports…

Read the report that each credit bureau keeps for you to make sure it’s correct, because mistakes can lower your score.

They usually offer many free and paid ways to check your records. You can go to their website and request a free copy of your legal credit report.

Check that your details are correct at each credit bureau. Photo: scientific

There are several ways to view your score for free. Sparexperten Kredit-Club allows you to access your Experian score. ClearScore gives you a score based on information provided by Equifax. A Credit Karma subscription shows you your TransUnion score.

Paula Roche, managing director of consumer solutions at Equifax UK says: “Contrary to popular belief, checking your credit report doesn’t change the result itself, so there’s no harm in taking a look and it can be hugely feasible.”

… and bug fixes

Common errors are wrong address in files or lack of relevant information.

If you spot an error, contact the lender and ask them to fix it.

If that doesn’t work, you can contact the rating agency to fix the problem, or add a note to your report stating that it was a bug.

Borrowing – warn

A general tip for anyone trying to build their balance is to get a credit card. While this helps to some extent, you should be careful how you use it.

Using a credit card responsibly shows that you are likely to pay off other debts, which increases your score.

Use your credit card wisely. Photo: Getty

The most important thing is the credit limit you get – a high cap appears on your credit file and indicates that other lenders have already decided that you are a responsible borrower.

However, you also need to think about your use of credit – how much credit you are allowed to borrow and how much you actually use. For example, if you take out a credit card with a maximum limit of £1,500, you must stick to the self-imposed limit which is less than the maximum.

Experian recommends only borrowing up to 30% of your limit. Raising your card regularly indicates to other lenders that you rely on credit for your daily expenses, even if you pay them back every month.

James Jones, Head of Consumer Affairs at Experian, says: “Bottom [your credit utilisation] The best – reflects how dependent you are on this loan.”

No matter how much you borrow, make sure you always pay it back on time or you will be penalized.

Register to vote

Being on electoral rolls helps banks and other lenders verify your identity. If you moved recently, it makes sense to register as soon as possible, even if there are no elections coming up. You can do this online through the Government Election Service Registration.

Pay bills on time

It will also show how you use your checking account on your credit report, as well as things like: b. Whether you pay your phone and energy bills on time.

For example, bouncing a debit or check, or making a disorderly overdraft because you don’t have enough money in your account, can negatively affect your score.

A worried woman looks at a bank statement
Your balance will be damaged if you make a disorderly overdraft. Photo: scientific

“Just try to keep your account organized — we’re only interested in borrowing. So if you have a positive account, we don’t see that,” says Jones.

To avoid errors, you should schedule direct debits and standing orders so that your account is debited on or shortly after payment.

post it

If you live with your partner, it can be tempting for one person to handle all the bills. But that does mean you can’t build your credit score and affect future borrowing, so make sure your name is on some of the bills.

Calculate the couple's bills
Spouses should ensure that they each have household bills in their name. Photo: scientific

If you are separating, you should also consider how this will affect your credit score, especially if you have syndications such as a mortgage. Don’t assume that your credit profiles will be separated after a breakup, even if you did.

“If you’re in a relationship and you tie your credit score, divorce won’t break that link,” Jones says.

After closing joint accounts or transferring sole ownership to them, you still need to unlink your credit reports.

Contact the three major rating agencies to request a financial separation so that you are not swayed by your ex-partner’s lending habits.

Do not be afraid

Even if you are financially responsible, sometimes life events cause you to have a hard time making a payment or to miss a direct debit. You can add a note to your credit report to explain why your score is low, but you must contact all three rating agencies.

A message from the utility company for the monthly payment via direct debit, an increase in electricity and gas, with crying stickers
Are you suffering from direct debt due to events in your life? Photo: Caroline Jenkins/Almy

It’s called a Notice of Correction and it can be up to 200 words in length so you can provide context, such as: B- Late payment due to unemployment or illness.

This does not improve your score, but it does mean that the banks will not automatically reject your loan application. Instead, they will manually evaluate it – which can lengthen the process – and see if they can offer you a loan, given this context.

You can remove the correction notice at any time if you no longer need it.