Looking after your credit rating

The information in this guide was last updated on 26/02/2014

Trying to understand your credit rating after being rejected by a lender? Here we look at what a credit rating is and how anyone can improve it themselves… 

What is a credit rating?

Credit ratings are used by lenders to rate how likely you are to fulfill your financial commitments like repaying loans or credit card bills. They are based on a number of different factors including your previous dealings and financial habits. Lenders use credit ratings and credit scores to decide whether to lend you money and, if so, how much.

Your credit rating will be based on information provided to lenders by credit reference agencies. The main agencies are Experian, Equifax and TransUnion.

They assess your ‘credit worthiness’ by looking at factors such as your:

  • history of borrowing and repayment
  • financial assets or liabilities
  • electoral roll information
  • any County Court Judgments (CCJs) you have against you

It’s important to know that there is no such thing as a universal credit rating – the way one lender interprets your credit worthiness may be different to another. So if you’re rejected by one bank, it’s very possible you’ll be accepted somewhere else and vice versa.  However, applying to multiple lenders at the same time may impact your rating.  

Why are credit ratings important?

Lenders use your credit rating to work out whether to lend you money. And if they decide to lend to you, they also use the credit rating to work out how much and at what interest rate.

What could damage your credit rating

Lenders get nervous about lending to anyone who has lots of outstanding debt elsewhere.

If you haven’t borrowed money in the past, there won’t be much information in your credit history for a lender to go on when deciding whether to extend credit to you.

If you a miss a payment (even if you then pay it off), that missed payment will stay on your file for six years

If you get a County Court Judgment (CCJ) for an unpaid bill, it can have a big impact on your credit rating, and will stay on your file for six years.

This is the way lenders confirm your identity – so if you’re not on the electoral roll, they may be suspicious of you. Apply to get on the electoral roll

Lenders like stability, so they are more likely to lend to people who have lived in one place for a long time.

Your credit rating can be damaged if you’ve taken out joint forms of credit with someone who has a bad credit rating.

Many people will make lots of applications just to get a wide range of quotes – but each of these applications is recorded and may impact your rating, especially in the short term. Some providers will offer you an indication of the actual rate you’ll pay without doing a full credit search – this is often called a ‘soft search’ or ‘soft quote’.

How to check your credit rating

If you’ve been turned down by a lender it's likely you’ll want to find out exactly why. You can ask the lender for information or alternatively, the good news is that it’s now possible to do it online for a small fee.

How do I do it?

Check your credit rating at all three of the main credit agencies. You have a statutory right to access your credit report for £2.

The credit rating agencies are:




It’s a good idea to check your credit score with all three, because each one might be giving different information to lenders.

When should I do it?

If you’re applying for a loan, mortgage or credit card checking your credit rating should be your first step. It’s also a good idea to check your credit rating from time to time even if you’re not applying for credit. That way you can catch errors before they become a problem.

What should I do?

  • Check every personal detail – even addresses that haven’t been updated can be hurting your credit rating.
  • Correct mistakes by writing to your lender and asking for mistakes to be corrected.
  • If your lender won’t change your details, write to each agency and ask them to add a ‘notice of correction’ to your file – that means your disagreement with the lender has been recorded.

How to improve your credit rating

You don’t need to go to a credit repair company to improve your credit rating – it’s possible to boost your score yourself.

  • Get on the electoral roll Apply to register
  • Close any unused cards. Forgotten cards may be used fraudulently without you realising.
  • Spread out applications for credit and use providers that offer ‘soft’ credit searches that give you quotes but don’t impact your credit rating.
  • Put a landline number on application forms if you can – stability looks good to lenders, so avoid using your mobile number.
  • Use a credit-builder credit card that has a low credit limit and helps you improve your rating provided you stay within your credit limits and pay at least the minimum due and on time. These are available from many high-street banks and building societies. You can check comparison websites to find one that suits your situation.