How to improve your credit score and credit rating
There are many reasons why you may have a low credit score. One reason may be that you've never borrowed before – and therefore have no credit score for companies to see – or perhaps you have late or missed payments on your record. Either way, we spoke to our experts about their top tips for improving your credit score:
1. Register to vote
By registering to be on the electoral roll, you will improve your chances of being able to get credit. This is because lenders use the electoral register to confirm that you live where you say you do in order to check for fraud.
2. Check your credit score regularly
Another way to raise your credit score is to start checking it regularly.
Often there are financial errors that have gone unnoticed and even one wrong detail could impact your score significantly. Becky says, "Always check your report for any errors and make sure absolutely everything is up to date. Also, make sure you are not linked to anyone with a bad credit score."
We show you how to check your credit score in our guide, Understanding Your Credit Score.
3. Build up good credit through credit
The only way that you can prove that you are worthy of lending, is by showing that you can do this responsibly.
Richard suggests that a good way to build up a history of responsible credit management is to go steady. "A good way to start is with a phone contract and a debit or credit card."
Becky is also in support of these smaller repayments and says that opening a bank account and simply staying well below your overdraft limit, or showing regular and prompt payments, could be helpful. How do you decide what should go on a credit card, though? Richard says, "The trick is to use your credit card for things that you would use your debit card for, such as fuel or shopping and then pay the full balance down immediately. This will show creditors that you can manage your money well."
Ultimately, it seems that slow and steady wins the race. Pauline's advice is to be patient: "It's best to take things slow and have a good grasp on how credit works before taking on more debt. Start with one credit card, put a small charge on it each month, such as groceries, and pay the balance in full to avoid paying interest. You can even set up a direct debit to pay off the balance and automate everything."
Once you've done this, you can start to really build your score. Pauline finishes, "Once you have a few months of good payment history, you can request an increase to your card's limit or apply for another card, a loan or a mortgage."
4. Only take on what you can afford
Finally, only take on what you can afford to repay. "Only take on credit if you are sensible, able to easily and regularly make your repayments and know you have a very good handle on your money. Use them only with a clear plan in mind and full control of your finances."
If, however, you do find yourself in financial trouble, Pauline's advice is as follows: "Always be honest with your lender if you face financial hardship."