How to rebuild your credit score

Having a good credit score can make life so much easier. Depending on what you apply for you can benefit from better rates, lower interest rates, higher credit limits and save you money in the long run. If you’ve had trouble in the past meeting your repayment schedule, then your credit score may not be in the best financial position. However, not all hope is lost! There isn’t a magic fix overnight but there are a few ways in which you can work towards rebuilding your credit score.

What factors affect your credit score?

There are a few factors which affect your credit score and but there are 5 main factors which seem to have the biggest impact on your credit score.

  1. Payment history. As mentioned above, you can get bad credit when you frequently make late repayments or miss payments all together. It is probably the most important factor in having a good credit score as potential lenders want to be assured that you will be trusted to pay back their loan if they accepted you.
  2. Amount owed. Your current credit usage is also taken into account. If you have a lot of credit available to you or you have maxed out your credit cards or store cards, then potential lenders may think you do not need any more credit. You can use the credit utilisation ratio to help you keep I control of your credit. It is recommended that you only use 50% of your credit and if you really want to boost your score then use less than 30%. For example, if you credit limit is £1000 then you should only spend up to £500 to show that you are capable of responsible lending.
  3. Length of credit. As a general rule, the older your credit accounts are and how long you’ve had them can help to increase your credit score. Potential lenders can look at all your credit accounts and history and also how recently you applied for credit.
  4. Have a mix of credit. When you have a range of different types of credit and can prove that you can manage them it will work in your favour this can include, mobile phone contracts, credit cards, a car loan, mortgage and more!
  5. Most recent credit. Lenders will look at your most recent application for credit and whether any hard searches were performed on your credit file. Multiple hard searches can negatively impact your credit score.

How can you improve your credit score?

Check your credit file

Many people check their credit and just look for the number or where they fall on the credit scale. However, taking a proper look at your credit file and the information that is on there can be really insightful. You should make sure all your information is correct and up to date and this could affect your score. Also take a look at your credit searches, if there is anything that does not look right, or you know you didn’t apply for then you could have been the victim of a fraudulent application in your name. If you need to make any changes to your credit file. You can contact your credit referencing agency who provide you credit file.

Make all your payments on time

As mentioned above, one of the biggest ways to increase your credit score is to make all your payments on time and in full. It can affect your credit score if you make late repayments or if you only pay off the minimum amount due on a credit card.

Disassociate yourself from financial links

When you take out credit with someone else for example during a joint car finance application, you will then become financially linked on your credit reports. If you no longer have any active credit with them and they have bad credit, then its best to disassociate yourself from them. This is because their low credit score could be affecting yours too.

Register on the UK electoral roll

The UK electoral roll or register is a list of all the name and addresses of everyone who is registered to vote in the UK. Lenders use the electoral roll to verify that you are who you say you are and can speed up the application process.

Build up a credit history

If you haven’t taken out any credit in the past, then you could find yourself having a bad credit. Many people think that no credit is a good thing. But if you haven’t had any credit before then you don’t have any evidence of what type of lender you will be. You can take out something small like a’ mobile phone contract or a credit building card and pay it each month to build up a credit history.