How to improve your credit score

How to improve your credit score

Your credit score can have a crucial effect on how much money you can borrow, for example, if you want to buy a house and need a mortgage. Your credit score, or credit rating, is based on your credit history and reflects how well you pay money back. Lenders will often only want to lend money to those who are classed as low-risk. That’s why it is important to understand what your score is, how it is affected and how you can build it.

In this guide, we will cover how to improve your credit score, reasons behind why it may be low and how long it can take to improve.

What is a good credit score?

The higher the number on your credit score, the better your rating is. However, what is classed as a good score can depend on the service you are using to calculate it. For example, Experian’s PLUS score ranges from 330 – 830, whereas TransUnion’s score ranges from 300 - 850. So, this should be taken into consideration when calculating your score. Lenders will often use more than one Credit Reference Agency to get a good idea of your score.

What is a good credit score?

The higher the number on your credit score, the better your rating is. However, what is classed as a good score can depend on the service you are using to calculate it. For example, Experian’s PLUS score ranges from 330 – 830, whereas TransUnion’s score ranges from 300 - 850. So, this should be taken into consideration when calculating your score. Lenders will often use more than one Credit Reference Agency to get a good idea of your score.

How can I build my credit score?

If you find you have a low score, don’t worry, there are ways you can improve it. The key factor is to show banks and lenders that you can manage your money well and you are reliable enough for them to lend money to.

Here are a few ways you can improve your credit score:

1. Pay bills on time

Paying your bills on time, before the deadline or due date, and paying the full balance rather than the minimum amount each month, will show that you can manage your money well.

2. Keep debt low

Being in debt is one of the biggest factors to affect your rating. Ensuring the amount of debt you are in is at a minimum, or setting up repayment plans to help get your debt down, is a start to building your credit score.

3. Only open new accounts when you need them

Sometimes you may need multiple accounts, for example, a current account and a savings account. However, having too many open, particularly if you don’t use or need them, can negatively affect your credit score.

4. Don’t apply for too much credit

Every time you apply for credit, your credit history is checked, which will leave a mark on your report. Therefore, if you apply for too much credit in a short space of time, this can go against you with regards to your credit score.

5. Keep your credit utilisation low

Your credit utilisation is the percentage you use of your credit limit and the lower it is, the better. This basically means, don’t max out your credit cards. Try to remain at least 50% below your limit, preferably 25%. For example, if you have a limit of £2,000 on your credit card, try not to borrow more than £1,000.

6. Ensure your details are correct on credit reports

If your details on your credit report are in correct, then your credit score will be too. Ensuring all your details are accurate and up to date, will provide a more accurate reading of your rating.

How long does it take see changes?

Building your credit score can take time, it won’t happen immediately and it will all depend on how bad your score is to begin with. As long as you follow the guidelines, it can take one to two months to start seeing an improvement. Although, it could take longer depending on what it is that is causing your low score.

However, if you want to improve your credit score fast, for instance, to buy a house, following the guidelines and committing to improving your financial reputation could see it begin to rise in no time.

If managing your finances isn’t your forte, why not choose a current account that helps you budget. The thinkmoney Current Account allows you to split your bills and disposable income, so you can ensure all bills are paid on time. Why not join ¾ of our customers who boosted their credit score!