Building your credit score
Building your credit score
Ever wondered what makes a good credit score? Our clear guide will define this, and outline the steps you can take to improve your credit score.
What is a credit score?
A credit score is a 3-digit figure used by lenders to determine if you’re a high or low risk when it comes to borrowing. It can give you an indication of how likely you are to be accepted for credit. Your credit score is based on your credit report, which is a summary of how you’ve managed credit in the past. To be clear, credit means borrowing money under the agreement you will pay it back later.
Where can I find my credit score?
You can get your score by using a credit rating agency. Three examples of these are Experian, Equifax or TransUnion (formerly Callcredit). Each of these companies will be able to provide you with your credit report. If you’d like to find detailed information on your report, each agency offers access for free for a limited period:
- Experian will give you the credit score for free, but you won’t have access to the full report. Or, you can use their CreditExpert product for 30 days for free (it’s then £14.99 a month)
- Equifax also gives you free access for 30 days (it’s then £7.95 a month)
- TransUnion also offers you a free statutory credit check
All of the prices outlined here were correct as of January 2020.
What are the benefits of having a good rating?
A good credit rating can improve your chances of successfully applying for credit in the future. What’s more, it could unlock lower rates of interest and/or promotional offers. However, if you’ve previously been turned down by a provider of credit then you should not make any further applications until you’ve applied for, received and understood your credit report. You should also contact the provider and try to find out why you’ve been refused the credit.
How can I build up my credit score?
If you use a credit card sensibly, over time it can help to improve your credit score. If you meet all repayments and repay outstanding debts on time, your score is likely to improve. But the opposite is true if you miss payments.
If you’re concerned about having a poor credit history, you could think about applying for a credit-building credit card. If you are accepted for one of these cards, you may be able to improve your score and potentially unlock better deals in the future as you have a chance to prove that you’re able to make all of your repayments on time and can manage your lines of credit.
Find out more about how credit building cards can help you by giving you access to funds and, if used in the right way, can help you build up your credit rating. With this type of card you can expect any initial credit limit that you’re offered to be fairly low, and interest rates to be high. So therefore it’s crucial that, before you decide to apply for more credit, you have worked out a budget and a plan so that you’re able to pay off more than the minimum payment due each month on your credit card bill. Setting up a direct debit is one way to help you do this.
How long does it take to improve my credit score?
Once you’re using credit responsibly, it can take up to six months for your score to improve. That’s because it takes time for credit agencies to ensure they have the most relevant information about how you are currently using credit. Any kind of financial activity you undertake – such as opening a new current account or getting a credit card – could in fact lower your score for a while.
What else can I do to boost my score?
There are a number of steps you can take to improve your credit score, including:
- Registering for the electoral roll. It’s quick to do so, even if you live in a shared accommodation. Credit providers use this information to confirm your details are correct and it’s a key factor in building your credit history.
- Applying for a pre-paid card can be an alternative to getting a credit card. They allow you to load cash on to them that you can then use to spend in any way you choose. They could also be a useful alternative to carrying cash.
- Getting a mobile phone contract – having this smaller form of credit offers a way to show you are able to pay your bills on time and be financially responsible.
- Managing your household bills. If you can prove you’re on top of your utility bills – regularly making payments on time – then this could also help your score. Again, set up direct debits where possible to help ensure you never miss any payments.