A good credit score can mean you qualify for cheaper rates on things like loans, credit cards, mobiles and mortgages. See how to improve yours.
How to improve your credit score
Why your credit score is so important when borrowing
A good credit score shows you’ve managed credit well in the past, such as repaying a loan or credit card on time. This means you’re far more likely to qualify for the cheapest interest rates and have access to more offers.
How lenders decide whether to lend to you
In the UK, three credit reference agencies compile information on how well you manage credit and make payments – known as your credit report or credit file.
They contain a list of all your credit accounts, such as any overdrafts, and how much you currently owe. Your credit score is then calculated based on this data.
If you apply to a bank or other lender, they’ll usually run a credit check so they can view this history to work out how risky you are to lend to. This check will often affect the interest rate you get, how much they’ll let you borrow or if you’ll even be accepted.
The most recent information on your report will have the most impact because lenders will be most interested in your current situation.
How credit checks work
There are two types of checks lenders can do when you apply for credit – hard and soft.
- Soft credit checks don’t affect your credit score. These are usually used by lenders or comparison sites to check your eligibility before applying, to indicate if your application will be successful.
- Hard credit checks could affect your credit score. These are used when you apply for credit and will show up on your credit report. Too many in a short space of time could negatively impact your credit score.
Avoid making too many applications for products such as credit cards or loans. Find out if it’s likely you’ll be accepted first by doing ‘soft searches’ with companies such as:
The benefits of having a good credit score
Generally, a good credit history might help you:
- Borrow the amount you need – you’re likely to get higher credit limits as lenders see you as a low-risk.
- Qualify for more products – such loans, credit cards or mortgages.
- Get lower interest rates – so borrowing is cheaper.
- Get lower insurance premiums – as insurance companies might consider your credit score when deciding certain types of insurance, such as car or home.
- Be approved for a rental property or mortgage – as landlords and mortgage lenders often review your credit history.
- Getting a job – as some employers check credit reports as part of their hiring process, particularly for roles that involve financial responsibility.
How a poor credit score can affect you
A poor credit score could mean you pay higher interest rates, have lower credit limits or are refused for credit entirely.
For example, you might see a loan advertised as 6% APR but a poor credit score could mean you’d be offered a 30% interest rate. Equally, a credit card could offer a two-year 0% interest period to those with a good credit score and just six months to poorer credit scorers.
Other lenders might offer you a different product to the one you applied for, such as applying for a current account but being offered a basic bank account without an overdraft.
A change in your credit score could affect your existing interest rate
Although rare, some lenders could change your existing interest rate if they deem you to have become more of a risk since you first applied.
Debt Camel has more information about interest raises on credit cardsOpens in a new window
If you think you’ve been unfairly treated, complain to the lender first. If you’re not satisfied with their response, you can complain to the Financial Ombudsman ServiceOpens in a new window
How to check and improve your credit report
Three agencies hold your credit report - Experian, Equifax and TransUnion - so it’s best to check all three well in advance of any application. There’s no cost to do this and you might be able to spot ways to easily improve it.
Check your credit report for free
Here’s what to check for:
- Make sure all your details are correct and report any mistakes to the credit reference agency straight away – even a typo in your address can affect an application.
- Make sure you’re registered to voteOpens in a new window at your current address – councils send voter data each month, so this could improve your score within eight weeks.
- Report anything that looks like it might be fraud, such as credit that you haven’t applied for – find out more in our blog How to report a scam or fraud.
You can check your credit score for free using:
- MoneySavingExpert’s Credit ClubOpens in a new window for Experian
- ClearScoreOpens in a new window for Equifax
- Credit KarmaOpens in a new window for TransUnion
Report and fix any errors in your credit report
If you spot mistakes, report them to the credit reference agency. They have 28 days to remove the information or tell you why they don’t agree with you. The ‘mistake’ will be marked as ‘disputed’ and lenders can’t rely on it when assessing your credit rating.
Negative information usually stays on your credit report for six years and can’t be removed sooner if it’s accurate. However, if there were reasons why you fell behind with payments that no longer apply, you can add a note to your credit report to explain this. This note is called a Notice of CorrectionOpens in a new window
A Notice of Correction won’t affect your credit score but it might slow down any applications you make to borrow.
The Information Commissioner’s Office has more information about correcting personal information on your credit reportOpens in a new window
Build a credit history to improve your credit score
When you apply for credit, the lender essentially wants to know if you’ll pay them back. A history of paying on time and as agreed therefore helps to show them you’ve been reliable in the past.
Here are things you can do to help:
- Open and manage a current account and stay within any agreed overdraft.
- Pay your bills on time – setting up Direct Debits can help with this.
- Be wary of joint accounts if the other person has a poor credit history. If you close a joint account, request a ‘notice of disassociation’ to stop your credit files from being linked. Find out more about Talking to your partner about money.
- Use eligibility checkers before applying for credit. Sites such as MoneySavingExpertOpens in a new window, Credit KarmaOpens in a new window and ClearScoreOpens in a new window show how likely you are to be accepted.
Improve your credit score with extra information
Here are some tips to improve your credit score:
- Make sure you’re registered to voteOpens in a new window at your current address. Remember to do this as soon as possible if you move home.
- If you rent, you can add your rent payments to your credit report. Find out more about Experian’s Rental ExchangeOpens in a new window
- Consider getting a credit-builder credit cardOpens in a new window they’re for people with a bad credit history or who haven’t borrowed before.
- The optional Experian Boost schemeOpens in a new window uses ‘Open Banking’ data to include payments for council tax, subscriptions and to savings accounts when calculating your credit score.
Avoid expensive credit repair agencies
You might see adverts from firms that claim to repair your credit rating. Most of them simply advise you on how to see your credit report and improve your credit rating – but you can do that yourself for free.
Some companies might claim they can do things that legally they can’t, or even encourage you to lie to the credit reference agencies. It’s important to never use these firms.
Find Applying for credit
Applying for credit
If you’re happy your credit report is good and you need to borrow, the next step is to work out what to apply for.
Compare your credit options
Here’s what to consider before applying for credit:
- Do you need to borrow? Most borrowing comes at a cost, so it can be an expensive way to buy something, plus it’s often a large financial commitment. Waiting and saving up might be a cheaper option. Find more help on Deciding whether you should be borrowing money.
- How much can you afford to repay each month? This will determine how much you can borrow and how long you’ll take to clear the debt. To help work this out, try our free and easy-to-use Budget Planner.
- What’s the cheapest way to borrow? There are many types of credit such as loans, credit cards and overdrafts, which are designed for different purposes. We explain the options in Deciding on the best type of credit for you.
Use eligibility checkers before applying
Applying for too many products within a short amount of time can damage your credit score as you might appear desperate for credit. This can mean organisations are less likely to lend to you.
Rather than applying, which uses a hard credit search, look for eligibility checkers that use a soft search to give you an idea if your application will be successful.
Many lenders and comparison sites use these, including;
- MoneySavingExpertOpens in a new window
- Credit KarmaOpens in a new window
- ClearScoreOpens in a new window
If you can’t find one for the product you’re after, always double check that you at least meet minimum eligibility criteria (such as a minimum income amount).
Double check your applications for errors
Once you’ve found the right product for you, you’ll need to apply. Depending on what the lender asks for, you might need to gather some information. This could include:
- your employer’s name and address
- your bank or building society account details
- your monthly or annual income
- existing credit commitments, including credit limits and amount outstanding.
Before you submit the application, make sure everything is accurate and matches the information contained on your credit report.
You should find out if you’ve been accepted immediately, though it can take a few days if the lender wants to do further checks.
If you’re declined, don’t apply again. Instead, find out what to do if you’ve been turned down for credit.