Taking steps to improve your credit score
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
30th November 2020
7 minute read
How can I improve my credit score? If you have had a chance to check your credit score recently and it’s showing up that you have bad credit, then you might need to take steps to try and improve it.
Improving your credit score is not only beneficial for your stress-levels, but more importantly, a higher credit score grants you access to better credit products in the future. There’s nothing worse than trying to apply for a mortgage for your first home and finding out your poor financial history means that you’re ineligible.
The Guru is a big fan of self-improvement. Whether it’s curling your moustache, getting a manicure or treating yourself to a back massage, looking after yourself is always worthwhile, as it leads to a more positive, happier you. Improving your credit score is like a back massage for your finances: it means less aches and pains, and a bit more flexibility.
Read on to find out how you can improve your credit score.
Why do I need to improve my credit score?
If you want to be considered for financial products in the future, then the only option is to take steps to improve your credit score as much as you can.
Repairing your rating will make things a lot easier for you down the line by making you seem a lot more trustworthy in the eyes of major lenders and providers.
13 steps to improving my credit score
If you would like to improve your credit score, there are many things you can do that will also improve your overall money management. Sticking to good behaviours when it comes to your personal finance will mean your credit score won’t have a chance to dip again.
1. Register to vote
If you haven’t already done so, joining the electoral roll is a big tick in the box for improving your credit score. It shows lenders that you’ve already made a commitment to living in a permanent residence and are happy to contribute in local and national elections. This is a good addition when trying to build up your trustworthiness and improve your credit score.
The next general election is taking place in the UK on the 12th December 2019. You have until 26th November 2019 to register to vote, otherwise you will not be able to take part.
2. Stop applying for anything else
First things first: stop making multiple applications.
Multiple rejections will be noted on your credit file and will not only damage your credit score but also make it seem like you’re desperate to secure a new line of credit. The idea is to build up trust as a borrower, rather than diminish it by applying for credit cards or loans that require an excellent credit score. Using an eligibility tool such as moneymatcher, will always clear this up in future.
3. Get a credit report
You need to get an idea of how bad your credit score is by getting a credit report. Chances are you already have this, but you might have only looked at the score itself. It’s best to delve into the report to have a look at how you’re being judged. You might even find there is a mistake on your report that you will need to appeal against.
4. Manage your spending
If you want to improve your credit score, you will need to cut down any unnecessary spending on credit cards. Increasing your debt will not only make it more difficult to pay back but will also increase the chance of you incurring more penalties due to late or missing repayments.
If possible, remove any temptation to spend by leaving your credit cards at home. If you can manage your spending in this way, it will assist you in improving your credit score.
5. Manage your debt repayments
This one sounds like it’s easier said than done, but it is the most important part of improving not only your credit score, but also your overall financial situation.
Whether you have a credit card, personal loan or mortgage (or perhaps all 3) that you need to pay on a monthly basis, they all need to be under control before your score can start to improve. Make sure you put enough aside each month from your income to meet the minimum payments, and where possible, overpay.
Once you have your debt repayments under control, you will have already made a great start in improving your credit score.
6. Avoid any opportunity to incur more debt
This is normally based on the interest-rate attached to your credit card, loan or mortgage, that might change depending on the terms set by the lender or provider. If you have come to the end of a fixed-rate period of interest, you will find that your repayments will also rise to follow suit. Reducing your repayments might require you to transfer your balance to a new credit card, but only if your credit score is good enough.
Facilities like current account overdrafts also make it very easy for you to incur further daily fees on top of any existing debt you might be managing. Whether this means switching current account to get an interest-free overdraft for a short time, or making efforts to reduce your overdraft usage, it will help you significantly.
Think about switching to a basic current account to reduce your ability to incur more debt in the future.
7. Manage your bills and reduce your outgoings
Alongside managing your debt, you also need to get paying your bills under control. This might include putting enough aside to make sure you can afford your bills each month, or if they’re too high, trying to reduce them.
Ways you can reduce your outgoings include switching to another electricity and gas supplier, cancelling unused subscriptions and even changing your broadband package. All these changes will help you save money, allowing you to divert more money into paying off your debts.
8. Make yourself aware of penalty fees
Paying off interest and penalty fees can be half the battle when trying to improve your credit score. It’s often difficult to get out of a spiral of debt once it has started, so it’s worth understanding how the fees work on each of your financial products.
The best way to find this out is by reading the summary box document or accompanying documentation that should come with your credit card or personal loan. If you can’t find it, you can always request this information from your lender or provider. This way you can ensure that you don’t fall foul of any more penalties in the future, and keep your credit score on track.
9. Disassociate yourself from other people and addresses
One thing that could actually be having a negative effect on your credit score without you knowing is your association with another person. If you have a joint account with an ex-partner or an ex-flat mate who also has a bad credit rating, this could be dragging your score down too.
To disassociate yourself from another person, you will have to get in touch with the credit agency linked to the account provider. Thankfully there are only 3, so you can either ask your account provider which one they use, or if you already know, get in touch with them yourself:
10. Take out a credit builder card
One direct way of improving your credit score is by taking out a credit builder card. While this goes against your pledge to ‘stop applying for anything else’, you can often still be accepted for these types of credit card as they are designed for those with bad credit.
Taking out a credit builder card and keeping up with the minimum repayments will often lead to an improvement in your credit score so is very worthwhile.
11. Act on any other suggestions within your credit report
If there are any personalised recommendations that have been included with your credit report, it’s best to act on them. Take another look and see if you’re able to complete any of the recommendations yourself without jeopardising your credit score in the process.
12. Maintain your credit score
If you feel like your credit score is starting to improve, then you should make every effort not to let it drop again. The following tips will help you in maintaining your current credit score:
- Avoid living in your overdraft – if you haven’t done so already, try to reduce your overdraft usage or switch to a current account with an interest-free overdraft to help you get out of it. This will stop daily overdraft fees piling up
- Never miss a payment – the responsibility is with you to not miss a payment, and it’s important you can keep this up every month, as you work towards reducing your debts
- Never go over your limit – try and be responsible with your money and be aware of how much you’ve got in your account before you start spending
- Seek out financial advice – if you’re worried about slipping into more debt, seek out financial advice to stop this happening
13. Always use an eligibility tool before applying
Once you’re happy that your credit score has started to make an improvement, you might be tempted to start applying again. While there’s nothing wrong with this, make sure that you don’t put your credit score at risk and instead, always use an eligibility tool such as moneymatcher.
What next for my credit score?
If you have managed to complete the 13 steps above, then you’ll be well on your way to improving your credit score. Just be aware that it will take some time to improve and unfortunately won’t happen overnight.
In addition, once you’ve started to see an improvement, that doesn’t mean you should apply for everything in sight! Instead, try sticking with the advice from the above steps and maintain your credit score. This will increase your likelihood of being accepted for important financial products in the future, such as a first-time buyer mortgage.