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Your credit score, also known as your credit rating, is the numerical value that is assigned to you based on everything that appears on your credit history. Credit scores are calculated by credit reference agencies such as Equifax, Experian and TransUnion. They’re used by lenders and credit providers to determine if you’re a good candidate for a loan or other credit product.
Throughout your life, your ability to manage various types of credit will be recorded on your credit report – and that activity forms the basis of your credit score. If lenders see something less than savoury in your borrowing history, they may view you as a borrower who’ll either miss or make late payments, which can result in being denied or getting approved with unfavourable rates and terms.
There are a number of things you can do to boost your credit rating, but it’s best to think of it as an ongoing process, not something that only requires a quick fix. While your financial history plays a big part in determining your credit score, another large aspect is making sure that your personal information is up-to-date, correct and accessible by lenders.
Here are the top 10 ways to improve your credit score:
This is possibly the easiest way to help build your credit rating. Being on the electoral roll gives lenders proof that you are who you say you are when you apply for a credit product and helps them ensure that you’re a real person.
Whether it’s for your phone, Internet or utilities, paying your bills in full and on time shows potential lenders that you’re responsible with your finances and capable of managing ongoing debts.
It’s important to regularly check your credit report for any errors in your personal details or financial history. Even relatively minor mistakes like having the wrong date of birth can have a negative impact on your ability to get credit.
Along with keeping your personal information up-to-date, you should also check your credit file and report for any potential fraudulent activity, such as someone applying for credit using your name or details. If you find anything suspicious, you should contact the credit reference agency directly.
Receiving any county court judgements for debt, or any other form of bankruptcy or default, will seriously affect your credit score. It will also make it much harder to get a loan or credit product in future.
If you’re still paying off a loan or credit card, you should prioritise getting these debts down as much as possible or paying them off in full. Ideally, you should pay off most or all of your existing loans before applying for a new one.
While it’s not always possible, having a stable address for an extended period of time, whether you’re an owner or renter, reflects well on your credit file and may make lenders more likely to consider you for a loan.
Your credit utilisation ratio is the amount of your credit you use compared to your overall credit limit. For example, if the total of your combined credit limits is £1,000 and you’re using £400, then you’d have a credit utilisation ratio of 40%. You should always try and keep your ratio below 25% if possible.
If you have multiple debts, it may be a good idea to try and consolidate them using a debt consolidation loan. This can make it easier to manage your debt payments and show potential lenders you’re responsible about paying off your existing debt. You may even be able to reduce your repayments if you can find a loan with a lower interest rate.
If you have limited credit history, you should consider opening a small credit account, such as a credit-builder credit card, to help build your credit. Just make sure to pay off your credit limit on time each month, otherwise you may end up negatively affecting your credit rating.
Unfortunately there’s no universal credit rating system, so a good credit score could be defined as one that doesn’t negatively impact your ability to get approved for credit and ideally helps you get access to the best interest rate and credit products.
Different credit reference agencies use their own ratings systems to calculate your credit score, so what’s considered a good score with Equifax, for example, won’t necessarily be considered a good score with Experian and vice versa. The credit ratings systems of the three major credit reference agencies are:
|Credit rating agency||Credit score ratings|
|Experian||Very poor: 0–560|
|Equifax||Very poor: 0–278|
|TransUnion||Very poor: 0–550|
It can take some time to improve your credit rating, especially if you already have some black marks on your credit file. Improving your credit score is a matter of repairing any existing negative marks and also building positive credit history, both of which can take anywhere from a couple of months to a couple of years.
In addition to making payments on time and not getting yourself into lots of debt, you really just have to keep your head up, practice the aforementioned credit habits and be patient when waiting for your credit score to improve. For now, you should continue to focus on maintaining healthy credit habits and wait until the black marks reach their expiration age on your credit report.
Unfortunately there is no tried and tested way to quickly improve your credit score or rating. It’s better to think of your credit score as an ongoing thing and instead focus on building good credit-building habits that you can sustain over time. Make sure you always pay your bills and debts on time and regularly check and update the details on your credit file.
No, there won’t be any impact on your score if you simply check your credit rating or request your credit report from one of the credit reference agencies. However, when you apply for a loan or credit card, then the lender will perform a hard credit check on you, which will show up on your credit file.
This will only be the case in situations where you share a joint account or have taken out a joint loan. Generally speaking, the credit scores of your spouse or other family members have no impact on your own credit score.
Surprisingly enough, this is not the case. There’s actually no such thing as a universal credit score. Every credit reference agency has its own scoring system, so you potentially have as many credit scores as there are credit agencies.
While credit scores are generally described as either good or bad, this is slightly misleading and suggests that credit scores are evaluated on a binary basis that means you’ll either be approved for credit or rejected. Major credit reference agencies actually use a more sophisticated five-point rating scale which generally range from “very poor” to “excellent”.
Despite some of them being listed on your credit file, things like your job, income, age and gender have no direct impact on your credit score. However, while your credit score will never be reduced because of your job or age, it’s important that these details are present and correct on your credit file as they will be checked by lenders when you apply for a loan or credit.
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