My Financial Broker is a credit broker and not a lender. Warning: Late repayments can cause you serious money problems. For help, go to https://www.moneyhelper.org.uk/
Your credit score is something that you may not think too much about, until you start looking into your credit options. Then, if you have bad credit, you might find yourself being offered higher interest rates, or could even struggle to borrow at all.
The question is, what can you do about a poor credit rating? Is it an easy thing to fix? While it can take a bit of time, improving your credit score doesn’t have to be complicated. We’ve looked at six simple ways you can repair your credit score below!
When it comes to your credit score, the first thing you should do is check that all your credit information is accurate. You can request a copy of your credit file from any of the three main UK credit reference agencies – Experian, Equifax and Transunion. Even a small mistake, such as your address being incorrect, could affect your credit rating, so it’s important to check for any errors.
If you do spot any inaccuracies, you can contact the provider directly, and ask them to amend these mistakes. And if the provider needs further evidence, you can ask one of the credit reference agencies above to raise a dispute on your behalf.
While it may sound a bit odd, proving where you live by registering on the electoral roll can actually help improve your credit rating. This is because your address, along with other personal information, will match the details on your credit report. Proving where you live therefore demonstrates that certain information on your credit file is accurate and up to date, meaning other information is likely to be too.
You can easily register on the electoral roll via the government website, and it doesn’t matter if you’re unlikely to be living at that address for a long period of time. Whether you’re in shared accommodation, at university or living with your parents, you can confirm your current address on the electoral register.
Did you know that late or missed payments can stay on your credit file for up to seven years? This means that if you don’t pay things like your utility bills on time, you could be damaging your credit score. You should always try to pay your bills, as well as your credit commitments, on time. And if you’re not able to keep to the repayments, you should tell the provider, so that they can work with you to put a payment arrangement in place.
It’s good to bear in mind that lenders typically focus more on your recent credit history, rather than debts from years ago. So even if you’ve made late payments in the past, if your bills are currently up to date, this shouldn’t impact your credit score too much.
If you have old debt, or credit cards you no longer use, it can be a sensible idea to pay this off. Having older, unpaid debt on your credit file can often lower your credit score. It suggests to lenders that you have been unable to repay the debt, when you may have just forgotten about it!
Repaying old debt also helps keep your credit utilisation low. Your credit utilisation is the percentage of your credit limit that you actually use. For instance, if you have a credit limit of £2,500, and you have used £1,500 of that, your credit utilisation will be at 60%. It’s generally encouraged that you keep your credit utilisation below 30%.
Although having negative marks on your credit file, such as late payments, can lower your credit score, you may not realise that having no credit history can be just as damaging. Lenders won’t be able to see how you’ve managed your money in the past, so won’t be able to assess the likelihood of you making repayments on time. If you don’t have much of a credit history, it can therefore be a good idea to borrow money and stick to the repayments, to build up your credit rating.
You may also wish to take out something like a credit-building credit card. These cards are designed for people who have bad credit, or a sparse credit history. Similar to regular borrowing, credit-building cards can help demonstrate that you’re creditworthy, as well as increase your credit score. Do bear in mind though that the interest rates on these cards can be higher, as you’ll be starting with a lower credit rating.
You may be able to instantly increase your credit score through Experian. Simply connect your current account to your Experian account, and they’ll use additional information to try and boost your credit rating. This could be things like your Netflix or Spotify subscription – keeping to these regular payments should demonstrate that you’re able to stick to loan repayments also.
Overall, repairing your credit rating can be a relatively straightforward process. Even if you have previously made late payments, lowering your score, if lenders can see that you’re working to build your credit rating, they may be more likely to lend to you in future. From mortgages to short term loans, it’s always a good idea to try to improve your credit score before applying.