How to improve your credit score

Published:
15 July 2010
Topic:
News,Money,Credit Cards

If you want to qualify for the best deals on everything from credit cards and loans down even to mobile phone contracts, it's vital to have a good credit score. The information held on your credit report could even prevent you getting the mortgage you need to buy the house of your dreams.

That's why staying on top of your credit score and making sure that it is accurate and as attractive as possible to banks and other lenders is hugely important.

You can access a copy of your credit report from one of the credit reference agencies, via MoneySuperMarket's credit reporting channel. This means you will see the same information lenders do they assess your credit report in the event of you making a credit application.

But if you find that your score is less than perfect, or you already know that you need a better credit score to qualify for the deals you want, these simple steps can help you to improve your score and increase your chances of getting the borrowing you want.

Check your details

Credit reference agencies, like everyone else, make mistakes. So one good reason for checking your credit file is to make sure that the information held on you is accurate, and if it isn't, asking the organisations concerned to change it.

In the interests of accuracy, it is also a good idea to update your credit file when your circumstances change.
If you have recently been made redundant, for example, and are struggling to keep up with your credit account payments as a result, you can even place a Notice of Correction on your file explaining the background to any arrears. This should help the chances of any future credit applications, particularly if you have since got yourself back on track.

Finally, it is also important to ensure that settlements of past debts - for example County Court Judgments (CCJs) - are noted on your file. Otherwise, you risk being unfairly rated by lenders.

Register to vote

Many companies use the electoral roll to verify your identification. If you are not registered on the electoral roll at your current address, you are therefore much more likely to be refused credit. This is easily remedied, though. Just contact your local council and ask for a registration form or sign up online.

Pay down your debts

To improve your chances of being approved for credit accounts such as cards and loans in the future, it is sensible to avoid maxing out your credit card. In fact, it is better if you can keep your balance down to no more than 30% of your credit limit. Otherwise, lenders may be concerned about your ability to keep up with repayments.

Stop applying for credit

If one lender rejects your application, say for a loan or credit card, it is not a good idea to keep applying for other similar products until you know what the problem is.

The majority of lenders carry out a so-called hard search on you each time you apply for a credit account, and that leaves a 'footprint' on your credit file that other lenders can see. So if you make lots of applications in a short space of time, those you apply to later could well think that you are over-stretching yourself financially.

As rejected applications also have a negative impact on your credit score, it is also sensible to only apply for deals you think you have a good chance of qualifying for.

The MoneySupermarket Smart Search tool, which does not leave a 'footprint' on your file, is a great way to find out which credit cards and loan offers suit your personal circumstances.

Get credit active

While having too much debt is a definite no-no when it comes to your credit score, never having borrowed can also work against you.

If you have never had a credit card or a loan before, lenders cannot look at your record to work out whether you are capable of sticking to a repayment plan.

So it's worth considering opening a credit builder credit card account, for example, to establish a credit history - especially if you pay it off in full at the end of every month.
You will then be more likely to be accepted for top deals when you need them.

moremoney

Pay by monthly direct debit

However much money you have, it's easy to forget a payment every once in a while. But being late or missing a payment often results in penalty fees and charges - as well as having a negative impact on your credit score.

Setting up direct debits and standing orders with your bank is therefore a good way to ensure that all your credit account and bill payments go out on time.
If you have the cash available and will not incur early repayment penalties, clearing loans or credit agreements ahead of schedule can also improve your chances of being accepted for more competitive deals in the future.

Close down old accounts

When deciding whether or not to take you on as a customer, banks and other lenders will look at the total amount of credit available to you, as well as the amount you owe.

To maximise your chances of being accepted for mortgages, loans and credit cards, it is therefore important to close down any accounts you no longer use.

Conversely, however, having a bank account and good banking history can also reflect well on your applications for credit.

The Equifax credit score test

You can get an idea of your credit score by taking this quiz, created by credit reference agency Equifax.
However, the best way to check the state of your credit score, and make sure it stays up to scratch, is to sign up for a credit score monitoring service.

Quiz

Questions

Yes

No

n/a

Are you registered to vote at your current address?

 

10

 

Do you have two or more active credit accounts - such as a credit card, mortgage or loan?

 

10

0

 

Are all your credit account payments up to date?

 

15

0

0

Have you missed any credit account payments in the last two years?

0

10

0

Do you have any County Court Judgements (CCJ) or past bankruptcies?

 

0

25

 

Have you ever defaulted on a credit agreement?

 

0

25

 

Have you applied for more than two credit accounts in the last six months?

 

0

 5

 

Scorecard

90-100 - Excellent. Your score shows that you are likely to be accepted for market-leading deals.
70-89 - Good. You have a good chance of being granted credit
at low rates with this score.
50-69 - Fair. Your score shows that you may not qualify for the best credit deals.
0-49 - Poor. Your applications for mainstream credit accounts are likely to be rejected.

Compare credit report providers today at MoneySuperMarket

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct

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