Guide to improving your credit score

Improving your credit score is the process of

1. CARRYING OUT ACTIONS TO IMPROVE THE FACTORS AFFECTING YOUR CREDIT SCORE, for example

• Paying missed payments
• Satisfying bad debts
• Getting a new credit card
• Clearing unauthorised overdrafts
• See Chapter 3: What are the top 6 credit score factors?

2. CORRECTING OR DISPUTING ANY ERRORS OR MISTAKES on your credit reports.

• See: Chapter 12: How to dispute errors & fix mistakes?

The process is done by you, but can be assisted by insights from companies such as credibble.com who will help you:

• Understand current problems with your credit file
• Know what you can do to start fixing the issues
• Monitor changes, and continually suggest actions to help continual improvements

The purpose is to make getting loans, mobile phones, and other accounts easier and cheaper

In 3 steps

1. FIND PROBLEMS

Analyse your credit history and identify the items that are causing your score to be affected:

• Find Obvious Problems (e.g. Missed Payments) – such as missed loan repayments or not being on the electoral register.
• Find Obscure Problems (e.g. Dormant Credit Cards) – such as a credit card you have that’s not being used, or bad financial association with someone else.

2. IDENTIFY REPAIR ACTIONS

You’d be surprised what some of the repair actions can be; for example

• Disassociating yourself with a past flatmate
• Getting a landline

There are over 154 things you could be doing, Credibble.com can tell you the priorities for you.

3. MONITOR FILE CHANGES AND MAKE REGULAR IMPROVEMENTS

Unfortunately, credit score improvement is not always quick and can require activity on a semi-regular basis, so

• Ongoing Monitoring Required – this is to see how the actions you’ve taken have improved your score.
• New Improvements Are Needed – as the score improves new actions will be needed, (most people do not know what to do).
• Improvement Stops As People Forget – many people forget about their credit file so it stops improving.

Credibble.com will tell you how your score is improving over time and point out the new actions that need to happen to maintain improvements.

It does depend on your credit history profile 📖

For example:

• If You Are Bankrupt – Over 2-Years

For someone who is bankrupt improving your credit score will take at least a couple of years.

• If You Have Reasonable Credit – A Month Or So

For someone who has a reasonable credit score, good improvements could only take a month or so (for example by just getting on the electoral register or paying off some debt).

For specific items:

• Disputing Errors and Mistakes – 3 to 6 months

This can take from 3 – 6 months to raise the dispute with your lender or the Credit Referencing Agencies (CRA) to get things corrected.

• Building your score after items such as missed payments

Typically, your credit score is built up slowly over time as the number of on-time payments you make increases

This process can be sped up a little if you are proactive:

• Stop taking out cash on your credit card.

• Getting some bills in your name.

YES 👍

You are the only person who has the authority to undertake all the actions to do this.

• Take control – repairing your credit history will also help you to take control of your financial life.
• This guide can help – this page lists many of the items you can start doing to repair your credit rating.

Credibble.com can make this process easier for you by providing valuable insights into specifically what you need to do based on your individual credit history – though it’s you that will be actioning the suggestions.

There are many benefits to having a good credit score 😃

1. Lower borrowing cost – as your credit rating improves, the cost of most forms of credit (mortgages, loans, car finance, credit cards, etc) reduce, so the cost of new borrowing becomes lower.
2. Borrow more – you’ll potentially have greater access to credit, whether that be a larger loan or credit card facility (subject to affordability).
3. Access to more contracts and accounts – you’ll no longer be restricted to ‘pay as you go’ type contracts, opening up access to cheaper deals on mobiles and various utility bills.
4. Own a home – with a bad credit score it’s possible that mortgages are not available, so improving your credit file could enable you to buy your own home.
5. Easier renting – letting agents look at your credit file and report this to potential landlords, making renting a home more challenging if your score is bad. On the flip side, if you have a good score this makes renting easier.

So, having a good credit score can give you many more options, and make borrowing cheaper.

Affordability – note that many of the above are subject to the loan, or credit being comfortably affordable to you, which the relevant company will check with you in detail beforehand.

Further reading – see How your credit rating affects the cost of borrowing by moneyadviceservice.org.uk

No, but they do make it super easy: 👍

• Finds Critical Issues – identifies all your critical issues, so you know what’s holding you back.
• 24 Point Assessment – provides a 24-points Credit assessment on all the things that lenders check.
• Personalised Actions – generates a list of personalised actions you can take without any guesswork

Credibble is an information provider and experts in credit repair 🛠️

They help you build your credit score by providing insights into your credit file, identifying:

1. Weaknesses – from the perspective of the lenders.
2. Actions – specific actions that you could take to improve your score (bespoke to you).
3. Monitoring & suggestions – ongoing monitoring and suggested actions to help you keep improving your score over time.

We’ve found Creddible to be easy to use, providing valuable insights and a logical pathway to credit rating recovery at an affordable cost.

Though you don’t need to use them, you can do this yourself.

Fully Authorised: Credibble Limited is authorised and regulated by the Financial Conduct Authority (FCA) under firm registration numbers (FRN’s) 713043 and 795412.

They are also partners with Equifax Credit Bureau.

NO 👎

YOU are the only person who has the authority to repair your own credit history.

• YOU can only start repairing – your file when you know what needs to be fixed.
• Credibble can help you to know what to do – so you can effectively improve your credit score.

YES 👍

Their system will do the following:

• Lenders Perspective – look at your credit report from the perspective of a lender.
• Why You May Get Turned Down – will show you the reasons why you may get declined by a lender.

You can potentially improve your chances of getting accepted by looking at your Credibble report first.

YES 👍

Their system will show you:

• Weaknesses – your files’ areas of weakness and what needs to be improved.
• What You Need To Do – all things you need to do to repair your credit (bespoke to you).

YES 👍

Their system will give you

• Date – an estimated date when you could apply again.
• Credit – for the type of credit you need.

CHECK YOUR OWN PERSONAL DETAILS 👎

Their system will not know, for example:

• Genuine or Fraud – if a recent credit application made was genuine or fraud.
• Moved House – if you’ve moved to a new house recently.

You’ll still need to check your own credit history, which is covered in Chapter 4 – How to Check Your Credit File

Credibble.com make the process of knowing what do to simple with their ‘Booster Tips’

Look at the ‘Score Boosters’ tab

• List of To Do’s – you will see a list of actions you can do which will improve your creditworthiness.
• List of What To Avoid – there is a list of actions to avoid which will impair your creditworthiness.

If your name’s not on the electoral roll, you will find it harder to get credit 🤔

YOU CAN REGISTER TO VOTE AT GOV.UK

• Online
• By Post

REGISTERING IS EASY 😃

• Takes about 2-minutes
• You need your National Insurance number.

When moving house, remember to re-register straightway to keep a solid history of electoral roll registration, which helps with credit applications.

A great way to show potential lenders that you can pay your bills back reliably is to get your name on utility bills ✍

• Gas bill
• Electricity bill
• Water bill
• Mobile phone contract
• Landline phone
• Internet

If you live in a house share, it might be worth considering putting one or two utility bills in your name or adding your name to some bills.

Your mobile phone contract contributes to your credit score 📲

Many lenders trust people who use a contract more than individuals on ‘pay-as-you-go’.

So why not start looking for good value mobile contracts?

A landline contract also contributes to your credit rating ☎️

• Lender Trust – many lenders trust people a little bit more who have an established landline contract.
• Stability – a landline indicates stability (for more info see How stability can help you?)

So why not start looking for good value landline contracts?

If you run a balance on a credit card, only making the minimum payment every month can have a big impact on your credit score 👎

It’s an indication to the lenders that you’re struggling with money!

• Quick Win – if you have the money it can be a ‘quick win’ to pay off this balance
• A Little Bit A Month – If you do not have the funds start paying a little bit more than the minimum payment every month; even 1% extra can help.

More information

• Chapter 6: How to use credit cards?
• Chapter 8: How to make your payment history work?

Now you have your name on some bills, the key is to pay them all on time

(as covered in Chapter 8: How to make your payment history work?)

• Missed or Late Payments – these stay on your credit report for up to six years!
• Suggests to Lenders You’re Struggling – not paying bills suggests to lenders that you struggle to manage your credit well.

To help to avoid this, set up direct debits to pay your bills, phone, and credit card payments.

When you pay for your insurance in monthly instalments the insurer will normally do a ‘hard search’, which affects your credit file!

If you’ve renewed a couple of insurance policies recently and are paying monthly, it’s possible that you could have a number of ‘hard credit searches’ on your credit report.

• Ask Insurer – if you want to pay monthly, ask your insurer before signing up, whether or not they’ll be doing a ‘hard credit search’.
• Pay Upfront – if you pay upfront, this will stop this from happening.

It depends 🤔

A credit card can be a great way of building your rating, though

• Bad Credit Rating – if you have a bad credit rating, also see ‘credit-builder credit cards’ below.
• Read This First – before applying for a credit card, read Chapter 14: Improve the chances of successful applications?

YES 🤨

Using credit regularly and responsibly is key to building your score.

It shows you can reliably pay back any money you borrow.

• Use ‘Lightly’ – use the credit card lightly, spending small amounts only.
• Clear Balance – pay your bill in full every month.
• Use For Budgeted Items – use the credit card to pay for items budgeted for rather than spending out of your means.

YES 👍

To help your score most, do not to use too much of your credit limit

• Use Only 10% – 30% of Credit Limit – use less than 30% of your credit limit on any one card, using 10% or less is ideal
• Shows Good Management – this shows lenders that you can manage your credit sensibly and you’re not desperate for quick cash.

YES 👍

If you have a balance which you cannot pay pack in full, it’s important to pay over the minimum payment:

• Pay 1% More – even if you pay back 1% above the minimum repayment, this can make a difference (obviously the more the better.

If your last card payment was the minimum payment when you apply for credit, it could reduce your borrowing chances:

• Reduces Credit Score – paying the minimum repayment every month impacts your score.
• Indicates You Have Poor Affordability – it’s a sign to lenders that you cannot afford the repayments and cannot afford to borrow more.

NO 👎

Closing old credit cards has the following negative impacts:

1. Reduces Your Combined Credit Limit – as you no longer have access to that card’s limit, this will reduce your total combined credit limit.
2. Increased Your Balance Usage – if you have a balance on other cards, the card balance percentage usage will increase which is not a good sign.
3. Reduced Average Account Age – the average age of your other credit agreements will reduce.

So, keep the card open, but ensure the usage is as previously described.

NO 👎

Withdrawing cash is expensive and affects your score:

• Lenders Do Not Like It – many lenders see it as poor money management.
• Expensive Money – interest is charged by most credit cards, so this is expensive money.

Note, if you’re withdrawing cash on a specialist card abroad, this is not seen in the same way.

Yes, but slowly 👍

It can be a good way to build your credit score:

• Increase Existing Card Limits – by increasing your credit limit on your existing cards.
• Apply For New Credit Cards – by taking out new credit cards (it’s a good idea to space out credit card applications ideally by at least six months).

Applying for several credit cards within a short period of time can damage your credit rating – some lenders see it as a sign of weak finances!

Your creditworthiness is partly measured by

• How High Your Credit Limit Is – your combined credit limit on your credit cards is one measure of how creditworthy you are.

Typically, the higher your limit, the more confident lenders often are that larger loan repayments are affordable for you.

Be careful 🤔

Your credit file shows all your balance transfers and if you’re not paying for them

• Can Show Reduced Affordability – some lenders take the view that you do this because you cannot afford to pay this back.

This can even apply to zero interest balance transfers, where you’ve transferred a balance on a card to take advantage of their zero costs.

Sometimes this can reduce your chances of getting a loan or mortgage.

If you have a bad credit history then a credit-builder credit card can help build your credit score 😃

• Good For Bad / Zero Credit – designed for people with little credit history, or bad credit history.
• Have Low Credit Limits – credit limits are normally low and with high-interest rates.
• Helps Build Creditworthiness – By using these cards and paying off the bill each month, you can build your creditworthy status.

The interest rates are higher than standard credit cards, typically 30% in interest a year, however, you won’t be charged if

• You repay the card each month (preferably by direct debit)
• Never withdraw cash

Example use of a credit builder card

• Spend say £60 a month on the card.
• Have no other financial issues.
• After six months or so your credit rating should start to improve.

After a year this could make quite a difference

YES * 👍

A good way to show lenders that you are creditworthy is to have a few credit agreements that are all up to date:

• Create Your Payment History – building a history of on-time payments.
• Show Slow Improvement – this will gradually improve your credit rating.

Try a mix of different credit accounts

1. Mobile phone contract
2. Other credit cards
3. Personal loan
4. Mortgage

Important *

• Be Affordable – only take out extra credit if you can afford the repayments; do not put yourself in debt and harm your credit by taking out agreements you cannot keep up with.
• Too Many Accounts – can indicate to a lender that you’re desperate for money, thus having the opposite effect than intended.

POSSIBLY 🤔

WHEN AN OVERDRAFT HELPS

An overdraft can help improve your credit history if 👍

• On Your Bank Account – if you have one on your bank account this shows lenders that your bank trusts you.
• Is Not Used – if you do not need to use it this shows you manage your money well and don’t need it.

WHEN AN OVERDRAFT CAUSES PROBLEMS

An overdraft can damage your credit history if 👍

• Regularly Used – if you use the overdraft every month you will see a negative impact on your credit report.
• High Expenses – regular overdraft use suggests to lenders that your expenses every month are higher than your income.

If you cannot live outside of your overdraft, consider getting a manageable loan instead, this will look better on your credit file.

IF POSSIBLE 👍

Some lenders, especially mortgage lenders do not like to see payday loans on your credit file.

• Viewed As Poor Money Management – lenders can take the view that these are a result of poor money management and your expenses every month are higher than your income.
• Consider Consolidating – one solution to getting rid of a payday loan if you have a poor credit rating is to consolidate into a new loan with a lower monthly payment. This will not only help your credit file but could also reduce your monthly outgoings.

IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY

YES 👍

As with short term loans, many lenders don’t like shopping accounts on your credit file.

• Shows Poor Money Management – lenders can take the view that these are a result of poor money management.
• Shows High Expenses – also that your expenses every month are higher than your income.

One potential solution is to consolidate your shopping accounts into one new loan with a lower monthly repayment which can help credit file and reduce monthly outgoings.

IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY

It’s best to keep your short term debt levels

• Ideally, zero short term debt is best.
• Or at least keep to a minimum.
• Over 40% of annual income is considered high.

Keeping well below 40% of your annual income should be your goal.

If you take out a loan (not payday or high-cost short term), and successfully pay it back, this can help to start boosting your credit rating.

• Can Show Good Money Management – this shows lenders that you manage your money well and meet your obligations.
• Can Improve Your Credit Score – in the circumstance where getting a loan that is affordable to you is the right thing to do, this can also help to improve your credit score.

Only consider this if;

• You were genuinely thinking of taking out a loan anyway.
• The loan is comfortably affordable for you.

If you take out a loan and do not make all the repayments, this will damage your credit file!

TYPICALLY YES 👍

A good number of credit agreements typically shows lenders

• You manage your money well
• So improving your credit rating

In Chapter: QUICK WIN ACTIONS we suggest:

1. Getting utility bills in your name
2. Getting a mobile phone contract
3. Getting a landline

In Chapter: HOW TO USE CREDIT CARDS CHAPTER we suggest:

1. Getting a credit card
2. Increasing your credit limit

This does not apply to payday, short term loans, and shopping accounts as covered in Chapter 7: How to use loans and credit?

NO 👎

Not all credit accounts are treated equally! The following is how lenders typically view different credit agreements:

• Top marks: for mortgages
• Good marks: for personal loans
• Medium marks: for utility bills and similar
• Negative marks: for short term credit such as payday and shopping accounts

WHAT IF I HAVE ‘BAD’ SHORT TERM CREDIT ACCOUNTS?

• Consider consolidating into a personal loan – if you have a few types of short-term credit (payday, shopping accounts etc.) you can consolidate these into a personal loan, which can reduce your monthly outgoings and improve your credit score.

IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY

YES 👍

Lenders are typically more likely to approve your application if they see you have long histories with other companies

• The bank account that you’ve been using for years (with an unused overdraft)
• Credit card
• Gas, electricity bills
• Mobile contacts
• Mortgage

Long-term agreements can do wonders to your credit report, so try to ensure that you keep your first agreement open if it’s a credit card or a bank account.

YES 🏢

Your employment status affects your credit file!

Lenders see full-time employees who’ve been in their jobs a long time as the lowest risk.

• Top Score For Full Time – full-time employees who’ve been in the same job for a good length of time.
• Medium Score For Part-Time & Self Employed – if you work part-time, or are self-employed, this typically will be seen as offering medium stability.
• Lower Score For Temporary / Contract – temporary and contract workers are typically seen as the riskiest, so have the lowest stability score.

YES 🏠

• Good Score For Homeowners – homeowners typically get a higher score than tenants.
• Time At Property Matters – the longer that you’ve been in your home the better, try not to move around too much. This applies to both tenants and homeowners.
• Unfurnished Lettings Better – tenants in unfurnished properties get higher scores than those in furnished.

If you are a tenant, get credit on your file for rental payments, see Chapter 8: How to make your payment history work?

YES 👍

Being on the electoral register indicates to lenders

• Stability – the stability of a permanent address.
• More Stability (Over 4 Years) – being on the register for more than 4 years gets the greatest number of points.

See Chapter 5: What are your ‘quick win’ actions?

YES 🤔

The most common issue that reduces people’s credit rating is payment defaults, especially on the higher value accounts such as mortgages.

Start fixing your credit score by

• Start Making Payments Again – start making your repayments in full and on time.
• Start Settling Arrears – start settling outstanding payments and your arrears.

For more information see Chapter 8: How to make your payment history work?

YES 👍

CCJ’s can greatly affect your credit file, and lenders are able to see the amount of your CCJ and date.

• If you settle the CCJ in full you can start rebuilding your credit rating.

IVAs severely affect your credit history 😕

It’s a formal insolvency arrangement for people who are unable to pay their debts.

• No Borrowing In An IVA – most lenders will not lend to someone in an IVA.
• IVA Effect Reduces Over Time – once the IVA has finished, its effect does reduce over time, and borrowing options will start to gradually open up again.

YES, BUT 🤨

Of all factors, bankruptcy is the most damaging to your credit file!

• Affect Lasts For Years – it affects your ability to borrow for many years.
• Effect Reduces Over Time – once discharged, its effect does reduce over time.

If your partner/spouse has a poor history, this can also impact yours 😬

If you’re linked with someone on a financial product, their file can be accessed and looked at as part of assessing whether to accept you.

If possible, it is worth keeping your finances separate

• A joint mortgage
• A joint loan
• A joint bank account (not savings)
• In certain circumstances, your utility bills

YES 🤨

If you’re financially linked to someone on any product, their files can be accessed as part of your application!

Joint bill accounts with flatmates and housemates can in certain circumstances  financially link you

• If they have a poor history this can impact you!
• Keep your finances separate

Check with any company where you’re looking to jointly go on bills with a housemate, whether or not they link you together financially.

YES 😃

If you’re no longer linked with someone with who you had a financial association with (split up with your partner, moved out of a flatshare, etc.)

• Write to the credit reference agencies.
• Request a notice of disassociation.
• This will stop their credit history from affecting yours in the future.

Note that this cannot be done if you still have a joint account open with your ex; this will need to be closed, or transferred to an individual account beforehand.

YES 🤔

If you have moved a lot this can reduce your chances of getting a loan!

Lenders prefer to see that you’ve lived at an address for a good period of time.

• Do not move too often or your credit score will suffer

1. Sign up for the electoral roll
2. Get a landline
3. Get your name on some bills
4. Pay bills on time
5. Pay insurance premiums upfront

As Chapter 5: What are your first ‘quick win’ actions?

1. Pay your mortgage on time
2. Pay your rent on time – and get credit from services such as Creditladder.co.uk and Canopy.rent

As Chapter 8: How to make your payment history work?

Mainstream lenders typically prefer applicants who

• Are consistent on applications – see 4. below
• Are homeowners – rather than tenants
• Are employed – rather than self-employed or contract workers
• Have a landline – rather than a mobile number
• Have kept the same employer, bank, and address for a while

Though if you don’t meet all these criteria there are are other options, though typically the worse your history, the more expensive the credit.

• A ‘credit search’ impacts your credit file and can be seen by other lenders 👎
• A ‘soft search’ does not impact your credit file and cannot be seen by other lenders 👍

CREDIT SEARCH WHEN YOU APPLY

When you apply the lender will undertake a ‘credit search’

• To help them to decide whether to lend or not – they will review your credit report.
• Credit searches appear on your file for up to 12 months – through their effect typically reduces over 3 months.
• Too many ‘credit searches’ impact your credit rating – and your chances of getting approved for credit.

SOFT SEARCH FOR GETTING A QUOTE

When you are getting a quote from a lender, typically they will only do a ‘soft search’

• Does not affect your credit score – zero impact your file.
• Cannot be seen by other lenders – only you’ll be able to see this soft search, not other lenders.

NOT GOOD PRACTICE 👎

Each time you apply for a credit card or loan (or insurance with monthly payments)

• A mark is left on your credit file
• A ‘hard credit search’ is done
• This is visible for up to 12 months – though the impact reduces every 3 months or so.
• Numerous ‘hard searches’ affect your credit report – it makes lenders think you’re desperate for money.

It is a good idea to space out credit applications ideally by at least six months.

YES 👍

Keep personal details the same between applications:

• Use the same job titles or phone numbers – use the same one on every form.
• Keep your address consistent – for example, don’t put ‘Flat 7, Alberta House, 15 Some Street’ on one application, and ‘7 Alberta House, Some Street’ on another

If you use different details, you might be flagged by National Hunter (which the lenders should tell you, if this was the reason for your credit application being refused)

YES 👍

In an ideal world, before applying for new credit

Eliminate as much outstanding debt as possible (especially when applying for a mortgage)

• Hesitant lending to those with a lot of debt – Many banks, building societies, credit cards, and companies can be hesitant about lending more if you already have a lot of existing debt.
• Debt above 40% of annual income is bad is a red flag (too many lenders).

This would not apply to a consolidation loan, where you’re specifically taking out a personal loan to pay off more expensive debts, such as payday or shopping accounts.

YES 👍

Take the guesswork out of applying for new credit

• Credibble looks at your credit report from the perspective of a lender.
• Credibble suggests an estimated date to apply for new credit.