When you apply for credit, whether that’s a credit card, a personal loan or a mortgage, the lender concerned will check your credit report to see if they want to lend to you.
If your credit score is squeaky clean, you’re far more likely to be accepted and have greater access to the very best deals on the market.
But if you’ve missed payments and generally not managed credit well in the past, your credit score is likely to have taken a hit and that means you’ll find it harder to get accepted.
Fortunately, there are a number of steps you can take to give your credit score a boost. Here’s five…
1. Get on the electoral roll
If you haven’t already done so, one of the quickest ways to improve your credit score is to sign up to the electoral roll. Lenders use this to combat identity fraud and check you live where you say you do.
All you have to do is contact your local authority or sign up online. Be sure to do this any time you change address.
2. Avoid making multiple applications
Every time you apply for credit it leaves a footprint on your credit profile which lenders can see.
If you’ve made several applications in a short space of time, this can give the impression that you’re desperate for credit and lenders may decide you’re too much of a risk and turn you down.
If you’ve been rejected, it’s best to try to leave it a while before applying again. It’s also a good idea to use our Eligibility Checker which will help you to see the cards you’re most likely to be accepted for, so you can apply more confidently, and it won’t leave a mark on your credit report.
3. Make your rental payments count
If you’re renting, building up your credit score can be a challenge. This is simply because paying your rent doesn’t contribute to your credit score, even if you pay on time each month.
However, if you pay your rent through an app called Canopy, you can start to build up your credit score via the credit reference agency Experian. This will demonstrate your reliability to landlords and banks and ultimately improve your chances of being accepted for credit in the future – including if you apply for a mortgage.
Through the app you’ll start a ‘Rent Passport’ which will give you a TrustScore (a reliability score) and give you access to ‘Rent Tracking’, which allows you to add your rental payments to your credit history.
You’ll also be able to take out a ‘Deposit Free’ insurance policy which gives you the option to avoid paying a cash deposit when you move into a new rental property. Instead, you and your landlord will be covered through insurance underwritten by the insurer Hiscox.
4. Use a credit card to build a credit history
Poor credit scores aren’t only caused by missed payments. If you’ve never borrowed before, you’ll have no credit history, and this means lenders won’t be able to see whether or not you’re a responsible borrower who pays back what they owe on time.
As a result, they may be more hesitant about lending to you.
Fortunately, there are ways to build up a credit history, such as taking out a mobile phone contract or using a credit builder credit card.
Credit builder cards do exactly what they say on the tin and help you to build up your credit score over time. You’ll usually be given a low credit limit to start with, but this may increase after a few months.
It’s important to pay off your balance in full each month as this type of card typically has a high rate of interest.
5. Make your payments on time
Finally, showing that you are able to manage your existing credit arrangements sensibly, whether that’s a credit card, loan, overdraft or mobile phone, will work in your favour.
To help you remember to make your payments on time, it can be a good idea to set up a direct debit for at least the minimum amount each month. If you continue to do this, over time your credit score should start to improve and you’ll be more likely to be accepted for better deals in the future.