How to improve your credit score

It always pays to check your credit score, says Ruth Jackson. Even if you’ve never been turned down for a loan, you could still be missing out on the best deals.

936_MW_P30_Per-Fin

Taking out a credit card can actually boost your rating

More than half of us don't know our credit score, according to market researcher YouGov. Given that your credit rating can decide whether you are approved for a mortgage or loan, what interest rate you pay on your credit card and whether you can get your pick of current accounts, it's surprising so many of us have never looked at it.

The big three credit-rating agencies Experian, Equifax and TransUnion hold data on 50 million British adults. "These companies can see into our financial souls," says the Financial Times. "They can use our borrowing history including any past mistakes to predict how likely we are to repay in the future."

A bad credit rating can mean you are rejected from mainstream credit deals.

So you won't be able to get those mortgages, loans and credit cards that you see in the best-buy tables. But it isn't as simple as having a good or a bad credit score: there are many categories between the two that can affect your finances. For example, have you ever applied for an interest-free credit card only to find you are accepted, but offered a shorter 0% period than advertised; or your credit card has a higher interest rate than was advertised? This is a sign that your credit rating isn't bad, but nor is it great. Lenders reserve their best deals for people with top credit scores.

If you've never checked your credit score because you've never been rejected, you could still improve your finances by taking a look and seeing what you can do to boost your score. Check your rating for free with ClearScore or by using checkmyfile.com's 30-day free trial. Make sure the information held on your report is accurate. If it isn't, contact the credit agency and ask it to make corrections.

Simple steps to take

This will improve your rating, as it shows you have roots at a particular address. Paying your bills on time obviously improves your score, so set up direct debits to ensure nothing gets missed. Make sure you are named on household bills, and have a bank account registered at your address.

Finally, don't assume that you have a good credit rating just because you've not taken out a loan before. "Lenders like to make informed decisions," says Vicky Shaw in the Daily Mirror. "If you have limited or no credit history, then lenders have insufficient financial information about past behaviour to use when making their decision." Consider taking out a credit card repaying your balance in full each month to boost your rating. Opt for a reward card and you can earn cashback, airmiles, or loyalty rewards while improving your credit score.

Recommended

Why you should still put money into a cash Isa
Cash ISAs

Why you should still put money into a cash Isa

Interest rates may be lousy, but tax-free saving into a cash Isa is still a good idea.
23 Feb 2021
How to use credit cards to deal with your debt
Credit cards

How to use credit cards to deal with your debt

Various types of credit card – including balance transfer and zero-interest – make owing money much less expensive, says Ruth Jackson Kirby.
16 Feb 2021
Prepare yourself for an end to “free” banking
Bank accounts

Prepare yourself for an end to “free” banking

Free bank accounts could soon be a thing of the past. But paid-for accounts can come with plenty of worthwhile perks, says Ruth Jackson-Kirby.
9 Feb 2021
Tax returns: make sure you declare child benefit
Personal finance

Tax returns: make sure you declare child benefit

If you owe HMRC a repayment of child benefit cash, you need to act quickly, says Ruth Jackson-Kirby.
26 Jan 2021

Most Popular

The days when you could get 7% from your bank are long gone – so what do you do?
Bitcoin

The days when you could get 7% from your bank are long gone – so what do you do?

With interest rates at rock bottom for so long, we’ve been forced to move from saving to speculating to earn any sort of return. Dominic Frisby asks w…
24 Feb 2021
Why you should still put money into a cash Isa
Cash ISAs

Why you should still put money into a cash Isa

Interest rates may be lousy, but tax-free saving into a cash Isa is still a good idea.
23 Feb 2021
Are we heading for another bond market tantrum?
Government bonds

Are we heading for another bond market tantrum?

The last time the US central bank tried tightening the purse strings, the bond markets threw a tantrum. With yields now rising, could we be about to s…
25 Feb 2021