Understand and improve your credit rating

Your credit score is a big deal. It affects how you get mobile phone contracts, car and home insurance, bank accounts, loans and energy deals. It shows how risky or safe a borrower you might be and it’s checked by lenders before they give you credit.

If your credit score is low, lenders may not lend you money, or they may ask you to pay a deposit or offer you more expensive contracts. Lenders all have their own ways of scoring you.

What affects your credit score?

  • Payment history – if you haven’t always paid on time this will give you a low score
  • Bankruptcy or judgments - these give you a low score and stay on your credit file for six years
  • How much you already owe – this may give you a low score (but if you pay back regularly it may not)
  • The length of your credit history – having no credit history will produce a low score
  • Being registered to vote – not being registered can give you a lower score

How to improve your credit score

So you can see it’s important to try to improve your score (or rating as it’s also called). Here’s how:

Pay on time

  • If you have a credit card, always pay the minimum monthly payment
  • Pay loans back on time. If you’ve not always managed this, start now and make sure you have 12 months of on-time payments
  • Set up a direct debit with your bank or building society to pay the minimum monthly repayment on any loans or credit cards, so you never forget
  • Cancel unused credit and store cards – as having too much credit, even if it’s not used, can be a problem

Show that you are settled and reliable, for example by:

  • Registering to vote
  • Ideally staying at one address for at least a year
  • Getting a landline telephone 
  • Trying not to switch bank accounts more than once a year 

Avoid being ‘co-scored’

  • If you’re financially linked to someone else because you pay joint household bills, loans, or have a joint bank account your credit score may be affected by theirs
  • If you’ve split up from someone you’ve had joint finances with (or just moved out of a flat/house share) you should also write to credit agencies to let them know to stop their credit history affecting yours in the future. See below for how to contact credit agencies

Check your credit reference files

  • Check your score and make sure there are no errors. Check every year or before any credit application. Check all the addresses on your file – make sure they are linked to your current address. Here’s how to do this:

How to check your credit score

You can find out your own credit rating by contacting agencies which hold this information. Look online at any of these:

Experian Credit Expert: www.creditexpert.co.uk

CheckMyFile: www.checkmyfile.com

Equifax Credit Report: www.equifax.co.uk

Callcredit’s Noddle service: www.noddle.co.uk

These are the agencies which lenders use to check your credit score.

Most charge a small amount (around £2) to give you your credit report. But you can get one free by registering for the free subscription service (which normally lets you check for up to 30 days). Make sure you cancel the subscription once you’ve got your information so you don’t get charged.