24 December 2014

Ways to improve your credit score

Every time you apply for credit e.g. a mortgage, loan, credit card, mobile phone contract or even car insurance, your credit record will be checked.

Understanding and managing your credit score could help you save hundreds of pounds on life’s major purchases as often the better your score, the better rate of interest you will be offered. We take a look at what credit checks mean and how to make sure your record is as good as possible.

What is a credit score?

Your credit score is used by banks, building societies and other institutions to determine the level of financial risk you pose to them if they were to offer you credit. It’s calculated using a number of factors, such as your history of debt, number of previous credit applications and electoral register information.

As well as using information provided by credit rating agencies such as Experian and Equifax, lenders will often have their own internal criteria for to determine who they can lend to.

Each lender’s criteria are different, so if you’ve been declined by one company, it doesn’t automatically mean you’ll be declined by another. However, you should avoid applying for a lot of credit- particularly in quick succession- if you’ve already been declined.

What is a good score?

Your credit score with Experian will be out of 999, where a good rating is considered to be 881 or above. With Equifax, the score is out of 600, and from 1/5 to 5/5 with Callcredit.

But remember that while having a good credit score could help you get good deals and low rates on financial products, lenders do not usually take credit scores from such a credit rating agency to be the only determining factor.

What’s in your credit report?

Your report will usually include:-

  • Name and date of birth
  • Current and previous addresses
  • If you’re on the electoral register
  • A list of all your credit accounts. Missed or late payments will stay on your file for at least six years.
  • County court judgments for non-payment of debts, bankruptcies and voluntary arrangements.
  • Details of any people who are financially linked to you – for example, through joint bank accounts and mortgages.
  • If you’ve committed fraud.

Your report doesn’t include race, religion, salary details, driving fines or council tax arrears.

Infographic about credit checks

How can you improve your score?

There are lots of things you can do to boost your rating, including:-

  • Always pay your bills on time.
  • Avoid too many applications for credit, and where possible use lenders that offer ‘soft’ credit checks. These checks allow you to get quotes without affecting your rating - 'soft' credit checks are visible on your credit report, but don't show up to potential lenders in the same was as a 'hard' check.
  • lose any unused cards.
  • Put your landline number on application forms to show stability.
  • Break financial links with people you’re no longer associated with.

How do you check your credit report?

Noddle, which is part of Callcredit, currently offers free access to your report for life, and you can get free 30-day trials of more comprehensive credit checking services from Experian and Equifax.

It might be worth obtaining a copy of your report from all three agencies because they could hold different information from different lenders.

Checking your own credit report doesn’t affect your credit score, and you can check it as often as you like. It’s only when you apply for new credit that a digital footprint will be left on your file and disclosed in future checks.

If there’s an error on your file, or you disagree with something, write to the agency involved to ask them to amend it. Alternatively, you can add a notice of correction.

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