Before you go about improving your credit score, it is important that you understand your credit score and how it works. Let’s go over the crucial parts of credit score together.
Check your credit score
You can check your credit score and report on Experian for free. After you open their website, go on ‘Get your free score’, and it will help you understand what credit accounts you have. A credit account comprises credit card, personal loan, mortgage, overdraft on your account; all of which, contribute to your credit score. It is suggested to use Experian as a vast majority of UK lenders use the scoring of Experian while approving and appraising applications.
Understand your score
You will get your score from 999 and your score can come in any of the five categories, which will help decide how good or how bad it is. For instance, if your score falls under the top 2 categories, which means either excellent or good, then the chances of you getting through a credit application are very good. However, if unfortunately, you get the score of fair or below then chances of you getting through a credit application are very limited. If you get fair you may be approved, however, you won’t get a very good rate. For example, with an excellent credit score, you can score rates as low as 3.8%(!). This is as UK interest rates are very low when compared globally. If your score is considered poor or lower, then it is better not to send your application right now and wait till you reach a point where your credit score is higher. Now, let’s focus on how to improve your credit score!
Look through all of your credit accounts and searches
You can view your credit report on Experian itself but it is recommended that you download the report as you will have to look through your credit accounts whilst also concentrating on your reports from the past 6 months. Experian will tell you if there were hard searches, meaning they will negatively impact your score or soft searches. For example, when you renew our car insurance there are many soft searches on our account, which don’t affect your score. If there are 1-2 hard searches in a month they will have a negative impact, so, it is better to have patience and wait 6 months before making a new application. If you however did not make the search or you were not sure that it was a hard search, contact the company and ask for that search to be removed from your credit report. If you’ve got a genuine reason or there has been an error, the company might remove it from your credit report.
Check your details
Having the credit report in front of you, check your address, name, if you are on the electoral roll and whether your address is correct. It does not matter where you’re staying, if you are living with your partner or parents for example. If you are above 16, you should be on the electoral roll. You can easily boost your score by 50-60% by making sure that all the details mentioned above are correct.
Rectify any late payments in the past 12 months
Look through and see if there are any late payments in 6-12 months as they will have a negative impact. Find about the payment and try to remember why it was late and think of a strategy to get it removed. You can contact the lender and request them to get it removed if it was just one time the payment was missed. You can even contact Experian help and request them to remove the late payment citing it as an inaccuracy. Experian will then either contact the lender or ask you to contact them accordingly. Moreover, for the future remember than there must be no late payments if you are planning to send an application. Moreover, if say there is a late payment, which was four months back, you can wait for two months as after six months, it will have very little impact on your credit score.
Having credit not in use increases the score
Yes, it is true and the use of your revolving credit is checked for your score. The revolving credit includes credit cards, overdrafts etc., which can be used anytime. For instance, if you have a 5000 £ overdraft, which you are not using, this means you 5000 £ worth of credit available to you. This credit looks good for lenders as they will know you will not miss the payment if you have access to 5000 £.
Use of revolving credit
The lenders want to see that you don’t have much revolving credit, which you can do by temporarily reducing it till you do the application. This will make sure that you get the best lender and the best rate and best rate.