How to improve your credit score
Your credit rating. Is it good, bad or ugly? Friend or foe? It’s time to look the beast in the eye and find out. Your credit score is one of the tools used by lenders to help determine how risky lending money to you is – the lower the risk, the more eligible you’re likely to be for their particular credit card, loan, mortgage or service. So it makes sense for first time buyers to improve or build their credit score…
Your credit score (also known as your credit rating) is found in your credit report – it’s a good idea to check it before you apply for any type of credit, including a mortgage, so you know where you stand. It’s worth obtaining a credit report from credit reference agencies such as Experian and Equifax to assess your current status and, if things aren’t looking great, there are small steps you can take to help improve it. It’s important to make sure all the information on the report is accurate, and – if it isn’t – take action! Get misinformation removed by contacting the lender responsible.
Want to be found worthy? Don’t we all. Never borrowed before? Seemingly NO credit score of any kind? Don’t worry! Here are five simple steps you can take to build up a good credit score…
You’ve seen wine-soaked film scenes where the protagonist tearfully cuts their credit card up into tiny little pieces? Sobbing among a sea of bank statements? Vowing never to spend a penny more? Well, that… won’t be you!
While a credit card can be an easy road to out of control borrowing, for most people that’s not the case. In fact, you could consider taking one out as a credit-building tool. If you regularly make small purchases using the card then repay the balance in full at the end of the month, you could start to build a good credit history. This would help show lenders that you can responsibly manage credit.
Prospective lenders and credit reference agencies use the electoral roll to check you are who you say you are, and you live where you say you live. Make sure your credit record shows the correct address details and you’re registered to vote at this same address. Simple, but this will improve your chances of being accepted for credit.
What if you’re not eligible to vote in the UK? Fear not! Add a proof of residency instead – send credit reference agencies at least two utility bills or a UK driving licence, in order to prove to them you live here. Ask them to add a note to your report to verify this – it will help you get credit.
These can lurk around and stay on your credit report for up to six years – like a bad smell. It’s a good idea to set up Direct Debits for any regular payments leaving your account, to ensure these go out on time, every time.
It’s already too late? It’s never too late! If you've made a late payment due to circumstances beyond your control (i.e. your Direct Debit wasn't set up in time), but you then made the payment as soon as you noticed, go talk to your credit or utility provider. Ask nicely and there’s a fair chance they’ll remove the black mark.
Evidence of stability counts towards a good credit score, as lenders feel more comfortable if they see evidence that suggests you’re a steady person. Though everyone's circumstances vary, and this may not all be achievable for you, be sure to bear in mind that the following things all help towards improving your credit score...
Plus, when you apply to borrow money, giving a fixed landline number rather than a mobile number can help with security checks and improve your chances.
If you’re a private tenant and you pay your rent on time, it’s now possible for you to use these payments each month to improve your credit score. This is thanks to a free scheme called the Rental Exchange.
How does it work? You pay your rent to a third party called Credit Ladder, which in turn passes this money onto your landlord or letting agent. Credit Ladder then lets Experian know whether the payment was made on time – pretty straightforward! The data will be visible to lenders by the end of 2017. Credit Ladder is a third party service which is subject to application. Not all landlords will be registered so you will have to agree this method of payment with your landlord.
The material contained in this document is for information purposes only and does not constitute advice.
You should obtain relevant legal or other advice if you are unsure about the effect on you of any matter in this document.
We have lots of different mortgage options, from Repayment and Offset, to Fixed, Tracker and Standard Variable Rate. If you’re not sure what any of this means, we can help.
We have a handy calculator to give you a rough idea of what you may be able to borrow – simply add a few details and get an indication in seconds.