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.

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.
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.
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.
There are two types of checks lenders can do when you apply for credit – hard and soft.
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:
Generally, a good credit history might help 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.
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
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.
Here’s what to check for:
You can check your credit score for free using:
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
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:
Here are some tips to improve your credit score:
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
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.
Here’s what to consider before applying for credit:
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;
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).
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:
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.