Read on to find out everything you need to know to get the best possible credit rating and improve your credit score.
Before You Start
Many of the tips in this guide rely on your having some idea of your current credit rating. To start, simply sign up for your Free Credit Report with TotallyMoney — then follow these tips.
Think About Getting a Credit Card
Rule number one to improve your credit rating: show lenders you can handle the money you borrow.
To do this, you could get a credit card and use it responsibly. This means paying it back in full each month and never exceeding your credit limit.
If you haven’t borrowed money in the past — or you have poor credit history — you’re likely to get turned down for mainstream credit cards. You can get an idea of your credit history by signing up for your Free Credit Report.
What you can then do is apply for a credit building card. These are ideal for those with patchy credit history, County Court judgements (CCJs), or a record of missed payments.
Interest rates on credit cards like these are high due to the above-average risk to the lender.
However, when used correctly — which means using the card regularly and paying off the full balance each month — they are a great way to help you build a good credit score.
Once you’ve improved your credit score, you’ll be eligible for lower annual percentage rates (APRs) and cards that offer better value for money.
Use our handy credit card comparison tool to find the best card for you. Once you tap in a few details, it ranks credit cards most suited to your needs in order of how likely the lender is to accept you — so you can apply with confidence.
Failed credit applications are a big red flag to lenders. Using our tool shows you what cards you’re most likely to be accepted for, which can help protect your rating from further damage.
Cut your Credit to Increase your Rating
Lenders like to see that you can use credit responsibly.
This means you should use a credit card regularly and sensibly, and make sure you always make at least the minimum repayment each month.
If you have old credit cards you don’t use, or high credit limits you don’t reach, getting rid of them will boost your credit rating. Lenders won’t want to lend to you if you already have credit you aren’t using.
A good way to view any cards you don’t use is to get your Free Credit Report. This way, you can ensure any unused cards don’t escape your attention.
Keep in mind, though, that it’s best not to strip everything to the bare bones.
If cancelling any credit leaves you very close to your limits, you may appear desperate for more credit, which could see you lose control of your debt.
To find a suitable credit card for your needs, use our credit card comparison tool.
Stability is Key
Stability attracts lenders, and there are many ways you can show this:
Get a landline
A landline can help with security checks because it shows you’re rooted at one address.
Register to vote
Lenders use the electoral register to check your home address, so being on it makes you far more likely to get credit. You can register or change your details on the government’s website.
Try to avoid moving house too often. If you’re renting, look for places offering at least a year’s tenancy.
This might seem like a long time. However, if you ask your estate agent to include a 6-month break clause in your contract, you’ll be able to end the tenancy early should things not work out as expected.
Commit to your bank
Although regularly switching bank accounts means you can take advantage of switching rewards and better interest rates, try not to do it more than once a year.
Use your Savings
It doesn’t make sense to have debts and savings. That’s because the interest you pay on your debt will be much more than the interest you make on your savings. Overall, it ends up costing you a lot more.
Pay your Bills on Time
Make sure you pay everything on time. It’s no surprise that late or missed payments damage your credit rating. Lenders want to be sure they will get their money back. You can avoid accidental mistakes by setting up direct debits.
These are the kinds of companies that report missed or late payments to credit rating agencies:
- Banks and other lenders
- Water companies
- Energy providers
- Telecoms companies
- Mobile phone companies
- County Courts
- Letting agents and landlords.
One great way to check any outstanding payments and your full payment history is to get your Free Credit Report. The report gathers all your financial behaviour in one place, and makes managing your credit much quicker and much easier.
Ditch your Partner
Anything where you have joint access to credit will appear on both your credit records and so their financial behaviour good and bad from the past, present and future will have an effect on your credit rating.
Their financial behaviour from the past, present and future may affect your credit rating.
Avoid the problem by breaking up with your partner. There’s no need to dump them in real life, but cutting your financial ties means one of you can maintain a good credit rating, while the other works to improve theirs.
To dump your partner financially, cancel any joint credit cards or current accounts you have. Then contact the lender and ask to be ‘financially disassociated’ from the person in question. Their credit history will then have no future effect on your ability to get credit.
It Pays to Check your Credit Report
What to Check
- Are your address details correct?
- Are all your bank accounts listed?
- Any bank accounts listed that you don’t know about?
- Are you still financially associated with an ex-partner?
- Has a satisfied County Court judgement not been removed?
- Are there any credit applications that weren’t made by you?
- Are any defaults correct and fair?
Good to know
County Court judgements stay on your credit history for six years — unless you pay the outstanding balance within one month. If you pay off the balance after then, the CCJ will appear as “satisfied” on your credit report until six years have passed.
If you want to improve your credit rating, you must regularly review your credit report. The good news is doing so shouldn’t cost you anything.
All you have to do is register with TotallyMoney to get your credit report — completely free.
Once you have your credit record, go through the checklist above to make sure everything is in order.
Credit agencies don’t share data, so it’s worth checking your report with the three main companies — Equifax, Experian and TransUnion— to make sure everything is accurate.
By law, credit reference agencies must let you see your credit record for no more than £2.
The worst things to have on your credit record are missed payments or defaults — and there’s no point pretending they aren’t there.
If you have some, check whether they’re accurate; if they’re not, speak to the lender involved and ask them to remove the mistake from your record.
You can easily check your late and missed payment history by getting your Free Credit Report.
Question the mark: raising a dispute
Raise a dispute with the company involved. Let them know you think the record is unfair and lay out your reasons why.
If the company refuses to remove it from your credit rating, you can go to the Financial Ombudsman. They will assess all the evidence available and decide whether the black mark is fair. If the Financial Ombudsman rules it’s unfair, it will be taken off your record.
Settle the debt
If there’s a black mark because you owe a company money, talk to someone there and see if you can set up a repayment plan to clear the debt.
Once the debt is paid off, check your free credit report to ensure it’s been recorded as “satisfied” or “settled”.
Add a Notice of Correction
If the defaulted or missed payment is entirely fair and doesn’t involve money owed, then you can’t get it removed.
However, you can add a Notice of Correction to explain any mitigating circumstances to future lenders.
For example, if you’ve missed payments in the past because you lost your job, you can explain why. You can mention that once you were employed again you were able to make payments regularly and on time.
Having a Notice of Correction on your credit report may well slow down credit applications, as lenders will have to check it manually. But since a default will usually stop you from getting credit, a slower process may lead to an accepted application — which is a vast improvement.
Escape the Circle of Rejection
Once you have your credit record in shape, don’t damage it with multiple credit applications.
It’s easy to fall into a vicious cycle where you apply for the best credit card, get rejected, and just start working your way down the best buy tables. But the more credit rejections that appear on your record, the less chance you have of getting accepted.
Our credit card comparison tool eliminates the risk of applying and being rejected. Enter a few details about yourself, and our tool will rank credit cards — not only by their suitability for your needs — but also in order of the ones lenders are most likely to accept you for, down to those lenders might reject you for.
While acceptance still isn’t guaranteed, you’re much more likely to be accepted if you apply for cards you’re eligible for.
The Golden Rules of Good Credit Ratings
- Check you your Free Credit Report regularly
- Register to vote if you’re not on the electoral register
- Get a credit card and use it wisely
- Don’t make multiple credit applications
- Be careful when taking out joint-credit products
- Set up direct debits so you’re never late with a payment.