It is important to take time to manage your credit score, and arguably little or no credit history can count against you as much as a poor credit history. 

Having a good credit score affects so much, from gaining a mortgage, a credit card, a loan, through to nowadays, bank accountants and phone contracts.  

To check your credit score you need to go online and get a personal report from a Credit Reference Agency (CRA).  There are three main UK CRAs: Experian, TransUnion and Equifax, and Credit Karma can also be added to the list as a UK CRA.  Banks tend to use at least one of the top three – if not all three. 

Did you know? Under the new GDPR rules, all CRAs must provide you with your credit report for free.

ALSO READ Your Credit File: How credit scores help you

Benefits of a good credit score and credit report 

A credit report provides the lender a holistic view on how you manage your money, your credit cards, overdrafts, loans and whether you make your repayments on time – which we know is key to increasing anyone’s credit score over time. 

For lenders, when you apply for a product and they run a check they’re simply looking at you on the risk scale – from low risk to high risk – so essentially they are attempting to predict your future behaviour, based on your past behaviour when related to credit.  

Increasing your credit score into the good and excellent category is important, as will give you access to the best lender, at the best rate, on the best terms.

Different strategies for improving your credit score. 

Majority of lenders use Experian scoring when approving applications for credit, be it a loan, a credit card or a mortgage. 

The score is out of 999.  If you are in the top two categories; Excellent (961 – 999) or Good (881 – 960) you have an incredibly good chance with your credit application. 

With a score in the Fair (721 – 880) category, your options are far more limited, but you may get approved by a secondary or specialist lender, you probably won’t get competitive rates – even in a low interest rate environment. 

If you are in a Poor (561 – 720), or a Very Poor (0 – 560) category, the general advice is don’t even do an application until you get your credit score sorted first. 

What constitutes a credit account?

A credit card, a personal loan, a mortgage, could even be an overdraft on a current account. These are all credit accounts; they all get monitored and are all contributors to your Experian credit report.

To get your credit score higher. 

First step is to view online or download your credit report, scan through all your credit accounts and look through all your searches.  Were they hard or soft searches? Because hard searches within the last six months will leave a negative footprint on your report.

Hard search awareness   

You can stop and wait for six months to pass before you make the application, or, if you didn’t make that search or you weren’t aware it was a hard search, contact that company and ask for the search to be removed from your credit report. If there is a legitimate reason this can often be removed. 

Register to vote at your current address 

Check your personal details, name, address etc., and ensure you are on the electoral register with your current address, as this helps confirm who you are and where you live. Anyone over 16 years old should be on the electoral roll, even if living with parents, relatives, or friends.  If it’s not in your report then this needs correcting.  It’s important, you can boast your score by 80 to 120 points by just making sure all these personal details are covered.  

ALSO READ Your Credit File: What lenders need to know

Late payments and setting up direct debits 

See if you have had any late payments in the last six to 12 months.  These will negatively impact your credit score.  Look to see when it happened and try and remember the reason why it happened.  There may still be time to get this removed, you can contact your bank / lender and see if it’s an option.  If for example you missed one payment, they should give you the opportunity to make that payment up to 30 days after, before it’s a black mark.  

You could even contact Experian (Help section) and ask for it to be removed from your report, if it’s an inaccuracy – they may contact the lender on your behalf or advise you to do so accordingly. 

Also, consider setting up direct debits for bills like, credit cards and mobile phones to make sure your payments are made on time.  

If you are planning on doing an application in the next month or so, you want to make sure there are no late payments.  However, if there is an older late payment, like three or four months ago, that cannot be removed – then it might be better to wait two-three months, then it will be removed from your credit report anyway, your score will be updated and you will see an increase.   

Having credit but not using credit increases your score

Having credit but not actually using it increases your score, because part of the credit report is checking your use of revolving credit.  Revolving credit is; credit cards, your overdraft, etc. 

If you have a £2,000 overdraft and you are not using it, you essentially have £2,000 worth of credit available and lenders look at this as a good thing.  The main factor with this is, if you are applying for a loan, it reflects you as someone that is unlikely to miss a payment. 

So, to get the best lender, at the best rate, try and temporarily reduce your use of revolving credit prior to submitting your application. 

ALSO READ Your Credit File: How lenders decide