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

How to trace lost accounts and share in £50bn of unclaimed assets
Personal finance

How to trace lost accounts and share in £50bn of unclaimed assets

Britons have amassed almost £50bn of unclaimed assets in lost accounts. Here’s what to do if you think some of the money may belong to you.
8 Aug 2022
Interest rates rise to 1.75% – the highest level since December 2008
Personal finance

Interest rates rise to 1.75% – the highest level since December 2008

The Bank of England has raised interest rates from 1.25% to 1.75%, and warns that the UK will fall into a recession this year.
4 Aug 2022
Smartphone banking: the best app-based bank accounts
Bank accounts

Smartphone banking: the best app-based bank accounts

Smartphone banking is convenient and, with features that help you budget and save, is becoming very popular. Saloni Sardana looks at the best app-base…
3 Aug 2022
Mortgage interest rates are surging – homeowners need to act now
Mortgages

Mortgage interest rates are surging – homeowners need to act now

Rising interest rates look set to spring a nasty surprise on millions of homeowners next year. You need to take steps today to protect yourself from a…
2 Aug 2022

Most Popular

Are UK house prices finally heading for a crash?
House prices

Are UK house prices finally heading for a crash?

The latest house price figures show a fall of 0.1% in July. With interest rates rising, inflation hitting double figures and a recession on the cards,…
5 Aug 2022
Brace yourself for the return of rationing
Economy

Brace yourself for the return of rationing

Russia is turning off the cheap energy. That is already leading to belt-tightening, says Matthew Lynn. Who will suffer most, and which sectors will th…
5 Aug 2022
Zhao Weiguo: China’s No. 1 chip tycoon vanishes
People

Zhao Weiguo: China’s No. 1 chip tycoon vanishes

Zhao Weiguo rode a decades-long boom in China pursuing Beijing’s core industrial policy of semiconductor self-sufficiency. Then he fell foul of Xi Jin…
5 Aug 2022