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How to improve your credit score: the ultimate guide

So, you’ve taken the plunge. Maybe you just checked your low credit score and did not like what you’ve seen. Maybe you have just been rejected for a loan or refused a phone contract. You’ve realised it’s time to build a good credit score from scratch or repair some old mistakes on your file. Either way, you’ve reached a conclusion: it’s time to improve your credit score. And why wouldn’t you? Credit ratings have a massive impact on us all, and it’s better to get them into shape sooner rather than later.

Whether you’re planning on applying for a mortgage, taking out a car on finance, or are in need of a financial safety net, you’re going to need to make sure that your credit report is looking good and the information the credit reference agencies (CRAs) hold on you is correct.

Before we kick off with improving your credit score, it is important that you understand how credit scores work and how they are calculated. We have a full explanation here about credit ratings in the UK and how credit scores are calculated here. Are you all brushed up on these topics already? Then let’s dive into the steps you can take to improve your score.

Improving your credit score step by step

Step zero: Make sure that you’re on the electoral roll

This one is a very easy fix, so if you’re not on the electoral roll, make sure that you do it now. Lenders need to know that you are who you say you are and that you live where you say you live. Being on the electoral roll gives them this information along with a little reassurance. According to Experian, once you get on the electoral roll, it takes 30 days to show on your credit report and to give you a welcome boost. The simplicity of this makes it a no-brainer. You could be registered and improving your credit score in the time it has taken you to read this so far, so this is a great way to improve your credit score quickly.

The basics of improving your credit score

Open a bank account if you don’t have one

Having an account and making sure that you are managing it well can show that you are financially responsible and the sort of person that companies are happy to lend to. Banks will check your credit report as part of the application process, but with basic accounts on offer, even with a poor credit score, you should still be able to open an account.

Typically when you open a new bank account there will be a temporary dip in your credit score. This is because the credit check is visible in your report. This impact is minimal and temporary before your score starts to move in the right direction.

Pay your bills on time and in full

You might not know this, but utility companies report your bill payments to credit reference agencies. It helps to build your credit score, if you have a few utility accounts on your name and you pay your bills on time and in full every time.

Pay your bills to improve your credit score
Pay your bills to improve your credit score

Build up some credit history

It is possible that you have a low credit score simply because you have no credit history. When lenders consider you, they like to see proof that you manage your finances responsibly. If you have not had any credit, there is no way for lenders to judge the level of risk involved in lending to you. You haven’t shown that you can’t manage your finances, but at the same time, you have no track record to show that you can. If you’re not sure how you can start building your history and how to improve your credit score, we have a few options coming up, so read on. 

Credit builder cards can improve your credit score

These are credit cards specifically for people who are looking to boost their credit score. With the likes of Vanquis and Capital One offering these types of cards, they come with lower credit limits than mainstream credit cards and charge a higher rate of interest. Managed well, they can give you the opportunity to demonstrate that you can manage your finances with monthly reports going to CRAs showing your repayments.

We discussed these cards in detail here, but the key with these cards is to repay your balance in full each month to avoid the high rates of interest. This type of credit, revolving credit, shows lenders that you have access to a line of credit on a constant basis, but that you only use part of it. This ticks a box with the lenders as it shows you are financially responsible.

Use prepaid cards

There are a variety of prepaid cards out there: cards that you load with money and can then use as a traditional debit card. Some of these also come with credit builder options. In these cases, you need to pay a monthly fee to the card provider. These can range from around £5 a month up to around £10. After you have paid the fee for a year, they show this as a completed loan to the CRAs. 

These cards can be useful if you have no other way of building any credit history, but if you want to know how to increase your credit score quickly, this might not be the best option. Also, there are plenty of alternative ways to increase your credit score that don’t cost you a monthly fee, with nothing in return. 

Try credit building loans to improve your credit score

Offered by companies such as LoqBox, these loans offer you a way to increase your credit score and develop healthy financial habits. By identifying how much you can save each year, the company will then set this money aside, and you repay it monthly over the next 12 months. Once you have paid the full amount, the company returns the money back to you. They report the loan as complete to the CRAs, giving you an increase in your credit score.

One thing to note with these loans is that lenders can not see that they are credit builder loans and so will not understand what you are trying to achieve. Sometimes when you take out a loan, it can be seen as an indicator that you are in financial difficulty and make it more difficult for you to borrow elsewhere. 

Use your rent payments to improve your credit score

Just as homeowners have their mortgage payments reported to CRAs every month, there is now also that option for tenants too. By signing up with CreditLadder, you can make your monthly rent payments help your credit score increase with both Experian and Equifax. If you are a tenant looking at how to increase your credit score fast, you can sign up in less than 5 minutes and be on your way to a better credit score. 

Show some stability

When looking at how to increase your credit score, you need to realize there’s barely a quick fix. This one certainly isn’t but the long-term effects will certainly move your credit score in the right direction. Lenders like to see some stability as it increases their confidence in you. Constantly moving house may suggest that you’re running away from something. Changing jobs too often could show that you can’t hold a job down and aren’t financially secure. Show lenders that you have some roots and they are likely to reward you for it when they assess your creditworthiness.

Keep your balances low

The best way to use credit cards as a quick boost to your credit score is to pay off the balance in full each month. But depending on what you’ve used your card for, this isn’t always possible. Maybe you’ve had an emergency repair to pay for and it just isn’t possible to pay it off in one go. This isn’t a problem in itself: as long as you don’t miss any payments you are still showing that you can manage your finances and will increase your credit score. The trouble is if you are relying a lot on credit and maxing out anything that is available to you; this suggests to lenders that you may be in financial difficulty. Keeping your balances low, ideally, 30% or less of what is available to shows lenders that you manage your money.

Pay down your debts and watch your credit score improve

When looking at how to increase your credit score quickly, a sure-fire way is to reduce your level of debt. Lenders can see if you are only making the minimum repayment each month. This can suggest to lenders that your finances aren’t in the best shape, and it also means you’ll be paying far more in interest than you need to be. Continually only making the minimum payment could also see your credit card being withdrawn and harm your credit score. The more you repay, and the faster you reduce your level if debt the faster you can improve your credit score.

Check your financial partners

It may well be that it is an ex-partner is standing between you and an excellent credit score. If you have ever applied for a joint bank account, mortgage, or any other form of credit with someone else, then you have created a financial link that is recorded by the CRAs. The link doesn’t end just because you have separated. If your ex doesn’t have the best financial habits, they could affect your credit score. Any time you make an application, your financial partner’s details may be viewed as well. To increase your credit score, you need to severe this link. This can be done with a notice of disassociation

Use an eligibility checking tool

This one might not be an obvious answer as to how to increase your credit score, as it seems more about protecting it, but bear with us. Using an eligibility checker before applying for any form of credit will give you more confidence in being accepted. Given that these checks only involve a soft search on your credit report, they won’t damage your credit score. If you apply blindly for credit, and you don’t know if you’re going to be accepted you can accumulate numerous hard searches in your file is a short period, which can make your credit score go down.

Successfully applying for, and then responsibly using, credit will increase your credit score as you demonstrate to lenders that you can manage your debts responsibly. Using an eligibility checker means that you can avoid damaging your credit score with declined applications.

Check your credit report

Not a way to increase your credit score fast, but a long-term strategy for credit score health. Being able to access your credit report and credit score for free means that there is no reason that you shouldn’t be checking, and checking regularly. Keeping a watch on your credit report means that you can see if it suddenly starts to go down and then let you take action to steady this before getting it back up. It also gives you the chance to do any work you might need to before applying for something like a mortgage. Keeping an eye on your credit score and report means that you can keep it in top condition and avoid rejected applications.

Join Wollit to improve your credit score

Irregular hours coupled with irregular income can make it hard to manage a budget. Not knowing what money is going to come in each month can sometimes lead to missed payments and damage being caused to your credit score. Wollit can prevent this scenario. You’ll know each month how much money you’ll have, and will be able to budget and keep on top of your monthly commitments.

As well as this, by being a member at Wollit you can actually increase your credit score. Income smoothing is seen in the same light as credit cards and so is seen as revolving credit. We report your use of this credit to the CRAs and so you will then see an increase in your credit score.

When looking at how to increase your credit score, there is no one quick fix that will do this for you. Being aware of the tools available, such as credit builder cards, Wollit, and CreditLadder, can help you achieve a boost in your credit score, but these need to be partnered with long-term strategies to show that you are a responsible borrower and seen favourably by lenders. 

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