Tips to Improve Your Credit Rating
Why Credit Ratings Matter
A number of factors can affect your credit rating. Late or missed payments to credit accounts will cause the most significant harm, therefore, please do always try to pay on time. In the event of financial difficulty, always contact the lender as soon as possible to try to seek a solution.
Rescheduling payments will have less of an impact on your credit rating than a default or County Court Judgement. We’ve listed below other factors that can affect your credit rating, or alternatively you can download our comprehensive guide to understanding the credit score.
What is a credit rating?
A credit rating is used by lenders to work out how risky it is to lend you money. If you want to borrow money, the lender will check your credit rating before agreeing to give it to you.
What is a credit score?
Some credit reference agencies (CRAs) use a credit score as a simple way to view your credit status. It is a figure that’s worked out using information from your credit report. However, each CRA has a different method, and will assess your credit score differently.
What is a credit reference agency?
A credit reference agency (CRA) collects financial information about people. It creates a credit report on you, and uses it to work out your credit rating.
How is your credit score compiled?
Your credit score is worked out using your financial history. The credit reference agencies gather this information from businesses, and then use their own formula to work out your score. Handling money well (e.g. replaying loans on time) makes your score higher, while handling money badly (e.g. missing mortgage payments) brings your score down.
Why does a bad credit rating matter?
Having a bad credit rating could mean that you are refused a loan, or financial contract. A bad credit rating could also mean that if you do get a loan, you maybe given a higher interest rate on it.
Who checks my credit file and credit score?
Any business that you are applying to for money, or for a financial contract (e.g. a mobile phone contract), is likely to check your credit file and score.
What does my credit score tell me?
Your credit score tells you how lenders might view your application. A high credit score is good. A low credit score can be bad. Having a low credit score tells a lender that you may have trouble making all of your payments.
How do I get my credit reference file?
You can write to any of the credit reference agencies and ask for a copy of your file (there is a cost of £2). It’s your right to be able to see your file.
If you have had an application turned down, you can ask to find out why. Also, check your credit report to make sure it’s correct. You don’t want a mistake to be the reason you were rejected.
What should I do if my credit file is inaccurate?
The first thing to do is to contact the credit reference agency and tell them about the mistake. They will then tell you if they can fix it or not. However, if they have been sent the wrong information, you will need to go directly to the business that it came from to get it fixed.
Effects of a poor credit rating
Having a poor credit rating affects every part of your financial life. A low rating almost certainly means you won’t get a mortgage. It also means that if you do get a credit card or loan, you may pay high rates on it.
Checking and managing
Check your credit report regularly to make sure that all the information is correct. If the credit reference agencies have incorrect information about you, it could end up with you being unfairly refused credit.
1. Register for the Electoral Roll
Many lenders will not give you credit if you are not on the Electoral Roll. You can sign up online at www.aboutmyvote.co.uk
2. Only apply for credit you need & close unused credit accounts
Credit searches leave a record on your credit file. Multiple applications, particularly in a short period of time, can damage your credit rating. A lot of available unused credit will make some lenders uneasy.
3. Stability helps
Anything that demonstrates stability will help – for example:
- Length of time at an address – the longer the better
- A working landline telephone can help
- A long history with your bank
4. Ensure you keep the addresses of your accounts up to date
Old, but still active, accounts at a previous address can increase your chances of rejection as they can interfere with identity checks.
- Shred personal data before disposing of it
- Do not write down passwords or PIN details
- Do not publish personal data, such as date of birth or address, on social network sites
- Do ensure that information you put onto applications is accurate. If lenders cannot corroborate information provided, lending applications may be rejected.
6. Check your credit files
Incorrect data may adversely affect your credit rating. So it’s a good idea to check your credit file: You are entitled to a statutory file for £2. These can be obtained online at:
If you find your file contains incorrect information, you can ask for it to be corrected using a Notice Of Correction, the credit bureau will advise you how to do this.
7. Protect your identity
Identity fraud is increasingly common. If you are affected it can seriously damage your credit rating and can take an extended period of time to resolve. Always protect your personal information:
If you would like advice about how to manage your debts, you can do this for free by contacting:
For help on credit ratings
The Money Advice Service
Telephone: 0300 500 500
Telephone: 0808 808 4000
Citizens' Advice Bureau
Telephone: 0800 138 1111
For help on credit references