How to improve my credit score

Understanding your credit score (or credit file) can be a tricky task, and improving it can be even trickier, but once you know how, it’ll open a whole host of options for borrowing potential and help you understand your financial situation, including debt in more depth.

What information does my credit score contain?

Before attempting to improve your credit score, knowing what information credit reference agencies hold for you is really important. It can help you understand any errors and check for any fraudulent activity. There are three main credit reference agencies: Equifax, Experian, and TransUnion – each will hold slightly differing information, so be sure to check each one.

The information most commonly found is:

Your name, DOB & address

Financial links to others – maybe your partner, parents, or friend. If their score is poor, yours could be affected too

Late or missed payments

Defaults & CCJs

Your electoral roll status

Any insolvencies – Bankruptcies, Debt Relief Orders and Individual Voluntary Arrangements are listed here

Previous searches – hard searches are visible to others, soft searches just to you

Balances of debts you have

So how can you improve your credit score?

Once you have checked your score across the three agencies, you’ll need to know what to look for when identifying any areas for improvement.

Check for errors – ensuring the small details such as your name, DOB & address are correct is important. Any small typos or mistakes can have a huge impact on your credit score.

Register on the electoral roll – you’ll need to register on the Gov website. If you’re not listed, it’s very difficult to obtain credit.

Your credit utilisation – if you have a £1,000 limit on your credit card and owe £750, you’re using 75% of the available credit. To improve your credit score, you’ll need to get your credit utilisation as low as possible – 25% or below is a figure to aim for.

High debt levels – if you have a lot outstanding already, a new lender may be worried about lending you more.

Late payments – meeting your payments on time shows that you have your finances under control.

County Court Judgements – these seriously impact your credit file and are a sign of being in debt which can be a big turn off for any potential lenders.

Keep tabs on your credit file – check it annually for any untoward details.

Address history – moving address a lot may cause creditors to view your situation as unstable.

Provide proof of residency – if you’re not eligible to vote, provide each agency evidence of your residency.

Financial links – if you were financially linked to someone previously but don’t live with them anymore or you don’t have any joint finances, request a notice of disassociation.

Use an eligibility calculator before applying for new products – this only leaves a soft search that isn’t visible to other lenders but will offer an indication of what products you qualify for.

Insurance policies – try to pay upfront rather than monthly if you can. They often charge high interest and perform a hard search on your credit file.

Credit builder cards – these are generally low balance, high interest credit cards for people with a poor credit history. These are useful but ONLY when you’re in a position to pay back the full balance each month.

Where can I view my credit file?

There are a few options available, be sure to cross check each credit reference agency and utilise their free trials:

You’ll be able to see any searches completed by lenders or companies. A soft search on your credit file is a search on your file that won’t affect your credit score, you’ll be able to see it, but other lenders won’t.

A hard search is when a lender looks in detail at your credit file; it’s visible to other lenders which means it could have a negative impact on your credit score.

Has your credit file caused some concern?

Many of us avoid our credit file, fearing it’ll confirm our biggest worry – we’re in debt. Understanding your debt is key in identifying how to tackle it, so whilst on first glance it may be daunting, you’ve took the first step in facing your debt.

If you’ve found details of your debts, or unearthed debt that you forgot about, today could be the day you take control of them and get debt advice.

Angel Advance offers free debt advice via our online debt advice tool, telephone on 01925 599400 or via email at info@angeladvance.co.uk. We have an experienced team of debt advisers who are ready and waiting to help you take control of your debts.