How to Help Improve Your Credit Rating

A credit score/rating is the analysis of your credit worthiness expressed in numerical form. In the UK, there are 3 agencies that offer free credit reports; Experian, Equifax and Callcredit. This rating is then used by lending institutions to judge whether you'll be a suitable debtor or pose a high risk for the institution's financial products.

If you have a poor credit score, you can improve it in the following ways:

Tips for Improving


Pay all your bills on time - Payments history accounts for roughly 35% of your rating. As long as you're settling your payments on time, your credit rating will rise. However, it only takes a few late payments for your rating to drop by several points. Use standing orders or direct debits to be guaranteed of timely payments.


Put down extra cash in the credit card balance - You are advised to use only a quarter of the total credit-card limit because the amount you owe on credit cards is also factored in your credit score. Suppose you have three credit cards with the maximum limit of each card at £3000 then the total credit-card limit is £9000. This implies that you should spend no more than £2250 but if you do, put down more than the minimum amount due.


Space your applications - If your application for a financial product is declined, do not apply for similar ones. Speak to the lender and find out why your application was not approved. Attempts for multiple applications lead to multiple logs on your credit and unfortunately, this gives the impression of identity fraud or desperation.


Reduce debt - One of the most important things that you can do to boost your credit rating is reducing your total debt. Avoid the trap of making monthly payments for your debt. This not only makes you stay in debt longer but you also pay more because of the interest charged.


Don't close unused accounts - It is quite common for people to have two or more credit card accounts. This increases their credit limit. If you're one such person then never make the mistake of closing unused credit-card accounts; it lowers the total credit available as well as the balance to credit limit ratio. In addition to this, closing unused credit accounts shortens your credit history.


Don't file for bankruptcy - Filing for bankruptcy isn't always a good idea. Go for it only if you're badly in debt.


Sort out your personal details - This may seem trivial to some but please take it seriously. First, get on the electoral roll. If you're not enlisted, getting credit may be tough. Remember, you need credit to get credit. Secondly, ensure that all your accounts show the same address as well as personal info. Finally, try to use your landline instead of your mobile number.