How to improve your credit score

People with good credit scores tend to have more options when they want to borrow money. Lenders are usually happier to take them on as customers, and they’ll generally be offered the best deals on new financial products like credit cards, loans, and mortgages.

So, if you want to know how to improve your credit score, you’re not alone.

While a perfect credit score is rare, a good credit score is something you can build up gradually. Let’s delve into how you can do this, explaining:

• The way your credit score is calculated, so you can have a more rounded view of the data that’s playing a role.

• The financial habits that can help improve your credit score over time.

• The financial moves to avoid when you want to raise your credit score, because they can have the opposite effect.

• Some myths and misconceptions about improving your credit score, including five factors that might influence your credit applications, but won’t make a difference to your actual credit score.

What is your credit score?

Your credit score is a number designed to offer an at-a-glance representation of your credit health.

It’s a tool you can use to understand your financial situation – giving you an idea of whether new lenders are likely to approve your applications when you need to borrow money.

Put simply, the higher your credit score, the easier it should be to find a lender willing to offer you a competitive deal. On the other hand, if your score is lower, you’re more likely to be offered credit agreements with higher interest rates and larger deposits or have your applications rejected.

A good credit rating is a sign that you’ve handled credit well in the past. Individuals with higher credit scores generally:

• Use a mix of different forms of credit over time. For example, a credit card, a personal loan, and repayments on a mobile phone contract.

• Make monthly repayments on time consistently, and according to the terms of the credit agreement.

• Avoid negative payment markers like arrears, defaults, County Court Judgments, and insolvencies. These can be added to your credit report if you consistently miss repayments.

Because having a higher credit score is associated with a proven track record of using credit and managing it well, lenders will generally see applications from these individuals as a lower risk than applications from people with a lower credit score.

How is your credit score calculated?

It’s important to know that there’s no such thing as a universal credit scorecard used across the UK. Your credit score is calculated differently by lenders, credit score providers like Checkmyfile, and the credit reference agencies (CRAs) like Experian, Equifax, and TransUnion. There can be slight variations in the credit scores you receive from each of these providers, and lenders usually have their own system for scoring the applications they get based on their own criteria.

Your credit score is based on the entries on your credit report, which is maintained by each of the CRAs.

If you live in the UK, you’re over 18, and you’ve used credit in the past, you should have a credit report with each of the three main CRAs. Your credit report includes information that’s publicly searchable and information that’s only visible to lenders, CRAs, and credit report providers.

• Public information includes entries on the Electoral Roll, court judgments, insolvencies, or bankruptcies recorded against your name.

• Private information includes the lenders you have, or have had, credit agreements within the past six years, the dates you made or missed repayments, and any formal applications you’ve made for new credit.

Depending on the type of data, it can have a neutral, positive, or negative impact on your credit score. For example, a repayment made on time on an active credit account is a positive marker to have on your credit report. On the other hand, a missed payment is a negative marker.

What does this have to do with your credit score? When you want to increase your score, adding positive markers to your credit report, while avoiding negative markers, is the way to go.

With all this in mind, let’s look at the ways you can start building a positive payment history.

The best way to improve your credit score

Improving your credit score doesn’t come in a quick fix; you simply have to show that you can manage credit responsibly by repaying your credit agreements on time every month.

This builds a track record of reliability, which shows potential lenders that if they took you on as a customer, you’ll manage your new credit agreement responsibly.

Setting up a direct debit can help to avoid missed or late payments, because the money will be taken automatically. It can also be helpful to make a note of when the payment is due, so it’s easier to budget for it each month. This can help avoid getting a negative marker from a missed payment – as well as any lender’s fees or penalties that may be charged for late payments.

Whatever you do to make it easier to stay on top of your outgoings and credit repayments, consistency will help you build up the positive payment history you need to improve your credit score.

5 other ways to improve your credit score

You might feel like you’re managing your finances well, and your credit score is still lower than you’d like. Or you might be in a position where your credit score has taken a hit, and you’d like to get back to a more positive position.

It’s normal to want to take steps to increase your credit score quickly. Here’s how you could do just that:

1. Stay credit active

It’s common to have a low credit score if you’re not actively using credit.

For example, if you only use a debit card, you bought your phone and your car with cash, and you don’t have a mortgage, you’re likely not using credit on a regular basis. It can be reassuring that you aren’t borrowing any money, but it also means you’re not building up a positive payment history on your credit report either – and that payment history is the information lenders really want to see when they check your credit applications.

Essentially, you need to use credit to have a good credit score. If you don’t use credit, your credit report won’t contain much data beyond your Electoral Roll information.

This is also why it can be more difficult to get a credit card when you’re under 21. Younger people generally don’t have credit reports with a long payment history, if any. This means lenders don’t have as much information to base their decisions on and, therefore, the application would represent a higher risk.

If your credit score is low because there are negative markers on your report (like missed payments or a default), continuing to use credit you can afford, and making your repayments on time consistently, will build up a positive record after the negative marker. This will put you in a better position once six years have passed since the date of the default or negative marker – which is when it should drop off your report.

Note: Showing you are credit active is one of the main reasons why closing credit accounts can lower your credit score. We’ll talk about this in more detail later.

2. Keep an eye on your CUR

Your credit utilisation ratio (also known as your credit utilisation rate or CUR) is the percentage of your available credit that you use every month.

Keeping your CUR at around 30% can be beneficial for improving your credit score.

It’s all about striking a balance that shows you know how to manage credit, and that you’re not dependent on it. If your CUR is consistently higher, it can start to lower your credit score because it can look like you rely too much on credit to make ends meet.

This is another reason why closing credit accounts can cause a temporary dip in your credit score. Closing a credit account when you have outstanding balances across other credit agreements could mean that your overall CUR rises. If this change is significant, it could impact your credit score. This isn’t a reason not to close that account you no longer need, but it can explain a slight unexpected drop in your score.

3. Make sure your Electoral Roll entry is up to date

We already mentioned that public records like the Electoral Roll can play an important role in calculating your credit score.

This means that one of the easiest ways to improve your credit score is to make sure you're on the Electoral Roll, if you’re eligible, by:

• Registering to vote.

• Correcting any errors in the way your name or address has been recorded.

• Updating your details after a name or address change.

Electoral Roll records can have a major impact on your credit score because lenders use them as an ‘index’. The UK doesn’t have a national database of residents, so the Electoral Roll maintained by your local authority is the main tool lenders have for checking that the name and address details on your credit applications are valid. When you apply, they check information like your name and home address against your Electoral Roll entry to confirm they match.

If the address in your application doesn’t match your current address in the Electoral Roll (e.g. your house number is 24 but your Electoral Roll says 42), the lender won’t be able to verify your details or see your full credit report. When this happens, it could mean the lender can’t see any positive payment activity you’ve made when your application is processed.

If you need to update your Electoral Roll details or register to vote for the first time, you can do it online in five minutes.

It’s important to update your details when you move house, when you change your name – for example after marriage, divorce, or by deed poll – and whenever you get a reminder from your local office.

Pay special attention to the spelling and format of your name and address. It can also be helpful to have a note of any old addresses and postcodes to hand when you’re filling in the form, as they’ll ask whether you’ve moved during the past 12 months.

Read more: Why is it important to register on the Electoral Roll?

4. Make sure all your accounts are up to date

In addition to keeping your Electoral Roll information up to date, it’s important to make sure the lenders you have credit agreements with have your current name and address on their records.

Most people remember to update their driving licence, passport, and current account details if they get married or move house, but it’s also important to contact your lenders, like the company that handles your car finance, for example.

Again, making sure your personal details are consistent across the board means all your payment history can be returned on your credit report, so you don’t miss out on any of the credit score contributions they can give you. Once all your details are recorded correctly, you can be sure all the relevant information will be returned on your credit report.

5. Check for errors on your credit report

From time to time, there can be errors on your credit report which can consequently lower your credit score.

Errors can have a big impact, such as a default that shouldn’t have been recorded because you paid off the debt on time. Mistakes that seem smaller, like typos in your personal information, can also have a significant effect as it could mean lenders aren’t seeing all the information they should be seeing when they consider your credit applications.

The easiest way to check the information on your credit report is with Checkmyfile, the most detailed credit report you can get. With a clearer picture of your past, we give you actionable steps to focus on your present — and progress towards the future.

When you create an account with us, you can cross-reference all the information on your credit report and identify potential errors that might be lowering your credit score. If you do find errors on your report, our customer care team can help you have them corrected, and work to improve your credit score.

Things to avoid when you want to improve your credit score

When you want to improve your credit score, building up a positive payment history is key. But it’s also important to avoid the financial missteps that can counteract the positive changes you’re making.

For example, if you’re doing everything you can to pay your mortgage on time, it’s important not to forget any other credit accounts you have.

Otherwise, you could raise the risk of:

• Arrears, which are consecutive months of missed payments. Arrears can be expressed as either the length of time someone is behind on the payments or the amount they owe. For example, someone could be three months or £800 in arrears on their credit card.

• Defaults, which show the relationship between the lender and the borrower has broken down after several months of unpaid debts. Lenders often report defaults after six months of missed payments, but it can vary.

• CCJs, which are County Court Judgments. These show a creditor took the borrower to court over an unpaid debt, and the court ruled in the lender’s favour.

• Bankruptcy, which is a form of personal insolvency that shows someone’s financial affairs are now being managed by a trustee, who works out how much of their debt can be repaid to their creditors.

• IVAs (Individual Voluntary Arrangements), which are formal agreements for borrowers to repay all or part of a debt – the Scottish equivalents are called Trust Deeds.

The more serious the negative marker is, the greater the negative impact it can have on your credit score. The issues can also compound (for example, if you don’t pay a default, you could be subject to a CCJ later). Having said that, you should never have something like a default added to your credit report without warning, as there’s a strict legal process of notifications in place before a debt can be reported as defaulted.

However, there are two things that can impact your credit score which you might not necessarily have on your radar:

1. Applying for credit comes with a hard search

When you make a formal application for credit, the lender checks your credit report. This is recorded on your credit report as a ‘hard’ search (also called an application search).

Too many hard searches in a short space of time can lower your credit score. This is because lenders can see this as a sign that you are struggling to be accepted for credit or that you have taken on a lot of credit recently. The outcomes of searches aren’t reported, so lenders won’t know if you’ve been accepted or declined for each recent application showing.

So when you’re shopping around or comparing products from different lenders, it’s helpful to use eligibility checkers rather than actually applying for a lot of different products. These perform ‘soft’ searches rather than hard searches, which still leave a footprint on your credit report, but don’t directly impact your credit score.

2. Closing your accounts

In many cases, you’ll close a credit account because you’ve finished repaying a debt, so it would be natural to assume that closing accounts might raise your credit score. However, the opposite is usually the case – at least in the short term.

When you close a credit account – whether you’ve paid off a loan, cancelled a credit card you no longer use, or consolidated your debts – it’s normal to see a slight dip in your credit score. When you’re no longer making monthly payments on the account, there’s less payment history being added to your credit report every month. They’ll still see the good work you did when you made timely repayments on the account before it was closed, but these entries have less sway over your credit score than the active accounts you’re still using.

This isn’t anything to worry about, but it can explain an unexpected drop in your score.

The age of your accounts can be taken into consideration for your score. New accounts have less of an impact than older active accounts as they don’t have as much history to show how you’ve managed the repayments. Older accounts with a longer payment history generally indicate a lower risk to lenders, because they show that an applicant has been able to follow the terms of their credit agreement for a long period of time.

Note: Closing credit accounts is a normal part of using credit and it’s important not to keep credit accounts open for the sake of your credit score. If an account is unused and therefore unmonitored, there’s a higher risk that fraudulent activity could go unnoticed if the account was compromised.

Things that won’t affect your credit score: tackling common misconceptions

We’ve looked at what to do (and what to avoid) when you want to improve your credit score. Now, we’ll turn to some of the things that may improve your chances of being accepted for new credit products, but which won’t have a direct impact on your credit score.

Remember, lenders won’t usually see the credit score you see because they’ll usually have their own scorecard based on their specific lending criteria and this will vary between lenders. When they’re considering your application, they’ll also look at information that doesn’t appear on your credit report.

If your goal is to improve your credit score, it’s important to be aware of the factors below so you can avoid the disappointment of making a big change only to see your credit score stay the same.

Getting a new job

Your job and salary can affect how lenders see your application. In particular, they look for stability and affordability. This is why it can be harder to get a mortgage if you’re self-employed and your income fluctuates, if you’re on a zero-hours contract, or if you’re still in your probationary period at a new job.

However, your current job, employment history and salary do not affect your credit score because they’re not reported to the credit reference agencies.

Moving frequently

There’s nothing wrong with changing your address, and moving is sometimes unavoidable. However, it can have an impact on your credit applications. Lenders can view frequent address changes as a sign of instability which can make your application look riskier than it would if you’d lived in the same place for several years.

While moving house won’t directly affect your credit score, it’s always important to update your Electoral Roll record and all your credit accounts when you move. This ensures that all the latest information about your credit use is taken into account when your credit score is calculated, so it accurately reflects your position, and it won’t be lower than it should be.

Ending financial associations

Depending on your lender and how they report their information to the credit reference agencies, you might be financially associated with someone if:

• You’ve acted as a guarantor for their loan or mortgage (e.g. if you’ve helped your child buy a house).

• You share a bank account with them (e.g. if you live in a house share and pool money for bills).

• You share a credit agreement (e.g. if you have a joint account with your partner).

It’s a good idea to keep an eye on who you’re financially associated with and to end any inactive financial associations.

Financial associations can show a lender that someone relies on you financially. Their name will come up when a lender checks your credit report, and the lender can take their credit report into consideration too. If they have any negative markets on their credit report, it can make your application seem like more of a risk and could impact your chances of being accepted for new credit.

Read more: How do I remove a financial association that's no longer relevant?

However, having a financial association won’t directly affect your credit score, regardless of what’s on the other person’s credit report. So, ending financial associations isn’t a quick way to improve your credit score.

How long does it take for your credit score to improve?

When your goal is to increase your credit score, and you’re taking as many steps as you can to do it, it’s natural to wonder how long it will be before you see results. This can be especially true if your goal is, for example, to improve your credit score before you make a big financial move or if you want to bounce back after getting behind on your payments.

It’s usually unlikely to see a big improvement to your credit score overnight, but if you consistently make your repayments on time, consider your credit utilisation ratio, and keep your personal details up to date, you should expect to see your credit score increase gradually over time.

Here are the time frames to keep in mind when it comes to the way your credit report is updated and maintained. It can take:

• Anywhere from one day to two months for your regular monthly repayments. Lenders usually report information to the credit reference agencies once a month. The CRAs then process the data and add it to your report. Depending on when in the update cycle you check your credit report it can take days, and sometimes weeks, for information about your regular payments to be reflected on your credit report and therefore, to be taken into consideration for your credit score.

• Four to six weeks for corrections. If there’s incorrect information on your credit report, your lender should respond within 28 days. If they agree the information needs to be amended, it can take four to six weeks for them to report the information to the CRAs they work with and for the CRAs to update your credit report.

• Three months for Electoral Roll information. Depending on when in the calendar year you report a change of details or register to vote, it can take as long as three months before you see the information reflected on your credit report.

• Six years for negative payment markers. The information in your credit report is reported for six years. After this they will no longer show on your report and will no longer affect your credit score.

To recap:

A perfect credit score is rare. Luckily, you don’t need a perfect score to be accepted for credit products, and there are plenty of things you can do to keep your credit score growing.

Once you’ve made sure there are no errors on your credit report, the best ways to improve your credit score are to:

• Make your monthly repayments on time.

• Stay credit active by maintaining any credit accounts you have.

• Monitor your credit utilisation rate.

And as you’re watching these positive contributions build up, just remember that the following can have a short-term impact on your score:

• The number of applications you make for new credit.

• Closing credit accounts.

When you want to grow your credit score, viewing your credit report is an excellent place to start. Use Checkmyfile, the only credit report in the UK that combines data from all main three credit reference agencies, and get a comprehensive view today.