How to improve your credit score

It can be easy to forget about your credit score if you’re not planning to apply for credit in the near future. However, it’s important to check your credit history on a regular basis so you can look out for any mistakes and, if necessary, work to improve it.

Understanding your credit score

Your credit score is determined by credit reference agencies (CRAs), based on your history of managing accounts and making payments.

It’s worth noting that you don’t have one single credit score in the UK. Credit reference agencies, such as Experian, Equifax and TransUnion, all have a different scoring system, which means you’re likely to have a different score with each one.

However, most of the steps you can take to build and improve your credit score will affect your credit file with each CRA.

The better your credit score, the more likely you are to be approved when applying for a credit card, mortgage, personal loan or other form of credit. Your score can also affect the interest rate and the amount you can borrow.

Don’t panic if your credit score drops slightly, as it’s usual for it to fluctuate depending on your activity. However, if your score drops unexpectedly or is persistently low, or you’re planning to apply for a mortgage or other form of credit, it’s a good idea to look at your credit history more closely and work to improve it.

Checking your credit score

You can check your credit report for free as often as you like without affecting your score.

Checking your own report only involves a soft credit check, which isn’t visible to other lenders and other providers and won’t harm your score.

It’s worth checking your credit history with all three of the main CRAs (Experian, Equifax and TransUnion) as information may differ between them.

You can view your credit history with the CRAs directly, or there are third-party platforms that you can use instead. You have a statutory right to view your basic credit report, but you can also choose to view your credit score and a more in-depth version of your credit history.

Bear in mind, you may need to pay (or sign up for a free trial) to see more detailed information from some providers, so make sure you check the terms of the service before using it.

11 steps to improve your credit score

Below are some of the ways you can improve your credit score:

1. Register on the electoral roll

If you haven’t done so already, registering on the electoral roll can help to improve your credit score, especially if you have a limited credit history.

CRAs and other providers use the electoral roll to confirm your identity, so making sure you are registered can help your credit score and any applications for credit. It can also help to minimise the chances of identity fraud.

It’s also important to keep this information accurate and up to date so, if you move home, make sure you update your details accordingly.

Bear in mind that, while moving home may be unavoidable for many reasons, changing your address too frequently could affect your credit score. Having the same address for a long period of time can be a sign of stability and is likely to be viewed positively by lenders and providers.

2. Try to keep old accounts open

The age of your accounts can also affect your credit score. Having a history of well-managed credit accounts, such as an overdraft or credit card, over a long period of time can have a positive impact on your credit history.

As a result, it’s a good idea to try to keep one or more long-standing accounts open (and manage them responsibly) rather than regularly opening and closing different accounts.

It’s also worth bearing in mind that, while it’s possible to open a current account without affecting your credit score, if you apply for a current account with an overdraft, this may involve a hard credit check that appears on your credit file.

3. Make regular payments

Making payments in full and on-time helps you to build up a good credit history as it indicates to providers that you are financially stable and can handle credit responsibly and, therefore, that you can be relied upon to repay any debts. This applies to all payments, including your rent, mortgage, utility bills, mobile phone bill and credit accounts.

Furthermore, paying more than the minimum payment on credit cards each month can also improve your score as it shows you’re in control of your existing debt.

Late or missed payments can stay on your credit report for six years , although their effect on your score will decrease over time.

Similarly, defaults, county court judgements (CCJs) and individual voluntary arrangements (IVAs) will also be recorded on your credit file and could stay there for six years.

4. Don’t apply for credit too often

When you apply for credit, a provider will run a hard credit check. This will typically appear on your credit report for 12 months.

Too many hard credit checks within a short period of time could indicate that you are in financial difficulty and may cause your score to drop. As a result, you should try to space out any applications for credit. Experian says that not making more than one application in three months is a good rule of thumb.

Before applying for any form of credit, it’s worth seeing if you can check your eligibility first. This allows you to see your chances of approval and, because it only involves a soft credit check, it won’t appear on your credit report or affect your score.

5. Keep your credit utilisation ratio low

Using a large proportion of your available credit can be a red flag for CRAs and providers checking your credit history. It could indicate that you may be struggling financially and relying on credit, so your credit score may suffer as a result.

As a general rule, it’s recommended that you aim to keep your credit utilisation ratio below 30% if possible.

6. Close any unused accounts

Depending on your individual situation, closing an unused credit card, store card or other account could improve your credit history. It can show you are able to manage your credit accounts responsibly and could also reduce the chances of fraud.

Having access to a large amount of credit could make you appear riskier to providers, but there are several factors to consider before cancelling a credit account.

Firstly, you need to consider how closing the account will affect your credit utilisation ratio. Closing an account could increase your credit utilisation ratio so, rather than improving your score, it could have the opposite effect.

Furthermore, having multiple long-standing accounts can be beneficial for your credit history. As a result, closing a credit card you’ve had for over 10 years, for example, could have a greater impact on your score than closing a card you’ve had for just one year.

However, even though keeping a credit card open could be better for your credit history in the short-term, if you would be tempted to spend and build up debt on that card, closing it is likely to be the better option.

Ultimately, it will depend on your own financial situation and credit history as to whether closing a credit account will help your credit score or not.

7. Cut financial ties

When you take out a joint account, such as a joint mortgage or a joint current account, you are then financially linked to the other named individual.

This means that their credit score could affect your score and vice versa. Providers may look at the credit score of the individual you share an account with when they run a credit check on you so, if they have a poor credit history, this could hurt your chances of getting credit and affect your score.

If your circumstances change or the joint agreement has ended, make sure this is reflected on your credit report.

8. Correct any errors

It’s important to check your credit score regularly so you can quickly spot and correct any mistakes.

Some errors on your credit report may be a mistake from the CRA or a provider, which you can ask to be corrected. The CRA needs to respond to you within 28 days saying what action (if any) it has taken.

Other errors may be more serious and could be an indication of fraud. For example, a loan or form of credit may have been taken out in your name without you knowing. Regularly monitoring your credit history can help you to spot and report any fraudulent activity early, before the situation becomes worse for you and your credit score.

9. Pay rent on time

Unfortunately for tenants, rental payments don’t normally appear on your credit history. However, there are several schemes you can join that report your rental payments to credit reference agencies, which means consistently paying your rent could help to improve your credit score.

For example, your landlord can sign up to the Rental Exchange Initiative for free. This scheme adds your rental payments to your Experian credit report but won’t appear on your reports from other CRAs.

Alternatively, you could sign up for schemes such as Canopy or CreditLadder that also report your rental payments to CRAs. On their free plans, Canopy reports your payments to Experian while CreditLadder reports to one of Experian, Equifax or TransUnion. Both providers also offer paid plans that report your payments to all the main CRAs.

10. Sign up for Experian Boost

To improve your credit score with Experian, you could consider signing up for Experian Boost for free.

This scheme allows you to share more information about how you manage your money with Experian and, depending on what it sees, your credit score may increase.

It can look at payments such as council tax, regular subscriptions and deposits into savings accounts.

Bear in mind that this only affects your Experian credit score; other CRAs don’t currently offer a similar scheme. Furthermore, not all lenders will necessarily consider this “boosted” score and information so it may not affect the outcome of any applications.

11. Consider a credit builder card

If you have no credit history, or a very limited credit history, a credit builder card could help.

This is simply a type of credit card designed for people who want to build up a credit history. These cards typically have high interest rates and low credit limits.

The most effective way to use these cards to build up your credit history is to use them for some of your regular spending and pay off the balance in full each month. This means you can build up a history of making repayments without paying any interest.

However, missed payments, going over your credit limit and withdrawing cash from the credit card (especially multiple withdrawals in a short period of time) are likely to harm your credit history, so it’s important to only use one of these cards if you’re confident you can manage it responsibly.

Bear in mind that applying for a credit builder card involves a hard credit check that will appear on your credit file. It’s worth checking your eligibility for a card first, before formally applying.