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Last updated: 12 January 2022
A credit score is used to predict your financial behaviour and allow lenders to determine whether they should or shouldn't lend to you. The rating is based on your credit history, which is essentially a report of your financial history.
Credit scores can not only affect your chances of getting a mortgage or a credit card, they affect rental applications, mobile phone contracts, and utility bills, plus a whole host of other similarly exciting things.
We're here to help you improve your credit score so you can get the best deals on the market for whatever product it is you're after.
How do companies find out my credit score?
In the UK, there are three main Credit Reference Agencies (CRAs): Experian, Equifax and TransUnion. These agencies collect, organise and hold financial data on you – information which they pass onto any credit or loan company who requests it.
Any credit application you make will require a credit check to be run on you.
What shows up on a credit report?
Any credit applications that have been either accepted or rejected will show up on your report, as will any repayments that you've made or missed. If you have any current loans or credit, then any outstanding debt will also be viewable on your record.
Financial links to other people, such as joint bank accounts, will also be visible. As a result, your credit score will be impacted by theirs (for better or for worse!).
At the more severe end of the scale, if you've ever declared bankruptcy or had any County Court Judgements (CCJs) against you these will show, but CCJs will be removed after six years.
More general information such as your date of birth and address will appear. FYI: if you've lived at several addresses over the years, this'll have a less favourable impact on your score as loan companies prefer consistency. Our apologies to the emerging generation of digital nomads…
Criminal records, student loans and your salary don't show on your credit file specifically, but when you apply for a loan it's likely you'll have to provide this information.
Why should I improve my credit score?
If you want to get a cheap loan or the best credit card deal on the market, then a strong credit score will be a significant help. While credit scores used to just be a concern of mortgage applicants, the way we operate in 2020 means your credit rating is always lurking in the background. Whether you spot a decent phone contract, or want get your dream car on finance, you'll want to be sure your credit rating is in good nick.
How to improve credit scores
Earlier we explained what shows up on your credit record. Improving on any of these aspects will also help to drive up your credit rating, but let's explore a few top tips.
Our best advice is to pay all your bills on time, and pay off your debts consistently as it shows you are reliable when it comes to borrowing money. If you have several debts you're struggling to keep up with, you could consolidate them to avoid missing multiple separate payments.
What's more, you should ensure you're on the Electoral Register. This will provide a proof of address for lenders to check when you make a credit application.
We also strongly advise you don't fire off applications left, right and centre. Apply to one if you're confident you'll be accepted, otherwise it's best to stay clear. If, for instance, you're looking for personal loans, then start by running a loan comparison to see what's on offer and what any application criteria are. When we compare loans like this, we're just putting the feelers out there: it's a soft search that doesn't affect your credit rating.
Is my credit score accurate?
We're not about to sow seeds of doubt, but we do have a word of advice. When you request your credit report from your credit reference agency, or learn of your credit rating, you should check it is correct. Occasionally, there can be inaccurate information on your file which could be the difference between acceptance and rejection.
Even those more administrative-based errors, like mistakes with addresses or inconsistencies with phone numbers, can affect your overall rating. Carefully look over your file. Be meticulous and if something doesn't look right, contact your CRA.
Lenders are primarily concerned with your most recent financial and payment history. If you've been bad with debts in the days of yore, but feel it's not a fair reflection of your present circumstances, then you can write an explanatory statement which can be added to your file. This'll also help improve your score overall.
Credit builder cards
The credit game can be a bit of a catch-22. For example, having a credit card and reliably paying it off is a great way improve your score. But if you've got a bad credit score to begin with, it can be difficult to get accepted for a credit card in the first place. So, what do you do?
Well, there are certain credit card providers that will accept applications from people with a bad credit rating. They specifically allow you to build up your credit score by use of what's called a credit builder card. Do be aware though that these credit cards come with much higher interest rates than more standard cards. Therefore, before you apply you want to be absolutely certain you'll be able to settle your monthly balance, otherwise you risk further damaging your credit score.