Mortgage

How to improve your credit score

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What are the benefits of improving your credit score?
By improving your credit score, you’re more likely to be:

approved for credit, such as a credit card, loan, mortgage or phone contract

offered a lower interest rate, which can make borrowing cheaper

offered a higher credit limit, which can help you achieve goals faster, such as buying a new car or making home improvements

Explore: 5 reasons to care about your credit score

How is your credit score calculated?
Your credit score is calculated using a points system, based on what’s in your credit report. It helps to understand the factors that can harm your score, so you can try to manage your money more effectively.

Factors that can harm your credit score include:

a history of missed or late payments

going over your credit limit

holding joint accounts with someone with a poor credit report

applying for credit too often, in a short space of time

frequently withdrawing cash using your credit card

bankruptcy, home repossession or Count Court Judgements (CCJs)

not being on the electoral register.

inaccurate information

Ways you can increase your credit score
Register to vote
Make sure you’re on the electoral register as lenders will use this to check your name, address and where you’ve lived before.

Lenders need to confirm these details to validate who you are before offering credit. So, if you’re not registered, it could cause a delay, or result in your application being turned down.

Prove your creditworthiness
If you haven’t borrowed money before, it’s difficult for a lender to judge how likely you are to meet your repayments. This impacts your credit score.

Taking a small amount of credit can help you borrow larger amounts in the future – as long as you manage it well. An arranged overdraft, or credit building credit card with a low limit could be an option for you.

Pay on time and stay within your limits
Lenders want to know they can rely on you to make regular repayments. A missed payment is likely to negatively impact your credit score.

Your payment history in the last 12 months will be most important to lenders. If you’ve missed payments in the past, but have since become more reliable, your credit score might not be affected as much as you think.

And spending near, or over, your credit limit every month is going to give the impression you’re struggling to manage your finances. So, try to keep within your limits.

Explore: What to do if you fall behind on debt repayments

Avoid multiple applications
Too many applications could indicate to lenders you’re struggling for money. If you just want to compare rates, ask your lender to do a ‘quotation search’ instead of a ‘credit application search’. This means it won’t show up on your credit profile.

Explore: Hard vs soft credit checks: What’s the difference?

Check for errors and report any mistakes
Check your credit report to make sure there are no mistakes and any amounts showing as owed on your accounts are correct.

Be aware of joint accounts
When you apply for joint credit with someone, such as an overdraft, joint loan or mortgage – your credit history will be linked to theirs.

If you’re looking to improve your score, you may want to ask your partner, for example, to try to do the same, especially if they have a poor credit report.

How long does it take to improve your credit score?
Improving your credit score can take time. For example, it can take several weeks for updated information to appear on your credit report, and a few months before any new accounts start to help build your credit score.

Information, such as late payments, can also stay on your credit report for 6 years. However, their impact will likely reduce as the record ages.

It may not happen overnight, but managing your money more effectively can make a big difference to your credit score and overall financial health. This will help you if, or when, you’re ready to apply for credit.

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