How to Improve Your Credit Score

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You could think of your credit report as a kind of ‘financial CV’ which shows your outstanding credit and how well you’ve managed credit in the past.

If you’re looking to buy a home, your credit report will be a major factor in deciding whether or not your mortgage application is accepted. There is no set benchmark which determines whether you’ll be accepted for a mortgage, as each lender will have its own individual scoring criteria which they will use when looking at your report.

However, in this article we will cover some simple steps that you can take to improve your score, and increase your likelihood of being accepted.

Get on the electoral role

Lenders check the roll as a precaution against fraud, to make sure that you live where you say you do. If you’re not on the electoral roll, your credit score will be negatively impacted, so sign up immediately. Don’t wait for the annual reminder, you can apply here.

Pay off other debts (if possible)

Lenders will be able to see the amount of outstanding debt you have. If you have a lot, then this will hurt your report. After all, do you think a lender would want to lend to someone who already had a lot of other debts to repay? Therefore, reducing your other debts (with your savings) is a clever idea.

Cancel unused credit cards

Access to too much available credit, even if it isn’t used, can negatively affect your credit rating. If you have a range of unused credit cards and lots of available credit, it could be a good idea to cancel some of them. However, it’s important to know that long-standing bank accounts with good credit histories can be a benefit to your credit score, so they may be best left open.

Check your file

Look through your report carefully to confirm the information is correct and up-to-date. If you discover any errors (such as an unfair default), then you need to dispute it as it will block most applications.

Unfair defaults can occur for a number of reasons. It could be a simple clerical error by the credit reference agency, in which case you can request that it be changed.

If it refuses, you are within your rights to add a ‘notice of correction’ to your report. This service is free-of-charge and lenders looking at your report must take it into account.

Take control

Now that you have take some of the main steps to clean up your credit rating, it’s time to take control and change your habits (if necessary). This means making sure that you never miss payments, and don’t max out any of your cards.

If you have do have credit cards, set up a direct debt to clear the balance each month if you can afford to do so. If not, simply repaying more than just the minimum will mean lenders look more favourably on you.

Additionally, while it may seem counterintuitive, if you have never borrowed any money then this could hurt your credit score, as it means there’s no evidence you are a reliable re-payer. In this case, try applying for a credit card, and use it for your everyday spending. Just be sure to clear the balance every month.

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