How to boost your credit score in 11 simple steps
On a scale of 1 - 10, how much do you know about credit scores? A good score is a green light, and could help you get approved for a credit card, a new tenancy or even a job. A bad score, on the other hand, can make things tricky. So let’s get clued up.
In the UK, there are 3 major credit reporting agencies: Equifax, Experian, and TransUnion. Each company holds a record of your financial history and marks you with a credit score.
When requested, they provide this information to prospective landlords, lenders and employers to help verify your identity and determine how financially responsible you are. Find out what credit score is needed to rent a property here.
But, a poor score isn’t the end of the world. Credit scores are like a set of scales, constantly weighing up the positives and negatives. Therefore, it’s always worth doing what you can to change the narrative and make your score the best it can be.
So, how do you boost your credit score? We’ve put together 11 simple steps to help you on the way.
1. Check your credit reports for errors
First things first, it’s important to read through your credit reports and make sure there aren’t any mistakes. According to The Independent, in 2018 around 10 million people in the UK found errors on their credit files, so it’s definitely worth checking!
Your information, such as your current and former addresses, should be identical across all three files. Even the smallest discrepancies could affect your score.
So, head over to Equifax, Experian, and TransUnion’s websites and request a report; you can get one free report from each agency a year. Then, meticulously work your way through the details. If there are any inaccuracies, now’s the time to get them fixed.
2. Look out for fraud
When you’re going through the reports, keep an eye out for any fraudulent activity. Although rare, someone might be using your identity and racking up debt in your name - a pretty creepy thought! If something doesn’t look quite right, contact the credit agency immediately.
If it turns out you’re a victim of fraud and someone has been creating accounts in your name, ask to have a notice of correction added to your file. This will make it clear that you weren’t to blame and your score won’t be affected.
3. Get a credit card
One of the most common causes for a low credit score? Having little to no financial history.
Your financial history is made up of your loans, such as a mortgage, student debt, credit cards, or a car lease. If you don’t have any of these and you’ve never applied for credit before, your financial history will look pretty empty on your report. As a result, there’s little evidence to suggest you’re responsible with money and pay debts on time, and so you’re marked with a low score.
To tackle this, you could look into taking out an interest-free credit card. However, credit cards can also have a negative effect on your score if you don’t use them right, so read on to make sure you’ve got all the bases covered.
4. Always pay your credit card bill
You can boost your score by using your credit card responsibly, and paying the bill in full every month.
You’re then clearly illustrating how reliable you are in paying back borrowed money, so your credit score will start climbing up.
5. Keep credit utilisation low
However, maxing out your credit card is never a good idea. It suggests that you’re irresponsible with money (and you might struggle to pay it off in one go), so your credit score gets lowered.
Instead, try to keep your credit utilisation ratio low. This unnecessarily complicated term simply refers to how much of your available credit you actually use. Spending a small amount suggests good money management, which is reflected in your score.
Experian recommends trying to keep your credit utilisation to 25% - 30%. So for example, if your credit card has a limit of £1,000, you might not want to use more than £300.
6. Register to vote
One of the simplest ways to boost your credit score is by registering to vote. This verifies who you are and where you live, which makes you appear more stable to lenders.
You can register on gov.uk here.
7. Get your name on some bills
Regular utility bills, such as gas, electricity and your phone contract can also help build up your financial history and boost your credit score.
However, you’ll only benefit from this if your name is on the account. So don’t sit back and let your scarily organised housemate do all the work, instead divide and conquer the bills.
8. Set up direct debits
Late payments are a credit score killer.
To avoid this from happening, set up direct debits to pay off your utility and credit card bills. No more calendar reminders or frantic notes on the fridge. Your money will automatically go out on-time, and prove your creditworthiness in the process.
9. Use rent to increase your score
Rent payments can now be added into your financial history, at no cost to either you or the landlord. By having them on record, your rent will not only validate who you are and where you live, but also demonstrate your ability to make reliable payments - so your score will improve!
Have a read of ‘Does paying rent boost your credit score?’ to find out more.
10. Don’t make multiple credit applications in a short space of time
Everytime you apply for credit a ‘hard search’ is carried out on your account, and this leaves a mark. The more hard searches you have on your report, the more desperate you seem for money - and this can be off-putting to a lot of lenders.
A hard search is more common than you think. For example, some companies might conduct a hard search on your file when you apply for a phone contract or insurance. However, here at Urban Jungle we do not discriminate against those with a low credit score; if you apply for our standard contents insurance policy we will not do a hard search.
So, if your credit card application gets rejected, be patient and try to wait a few weeks before applying again.
11. Use an eligibility checker
To avoid being rejected you could use an eligibility checker. These carry out ‘soft searches’ and estimate how likely you are to be accepted.
Most credit card companies and price comparison sites offer them and they won’t affect your score!
So there you have it, 11 steps you can take to boost your credit score!
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