How To Improve Your Credit Rating


This broad guide compiles many of the things we've learned from years of experience working with credit agencies and people in debt. While there's no one-size-fits-all solution for everyone, we hope everybody can find some helpful information in these pages.


The beginning of a better financial future

Despite what you might have heard, there's no quick fix to improving your credit rating. It takes a combination of perseverance, good financial management and using the right products to get back on track.


It can be frustrating – but remember, you're not alone. Thousands of people seek help with debt problems in the UK every day. By maintaining good habits, and with the right support and advice, you give yourself every chance of resolving your money problems and regaining your financial freedom. 


Managing your finances: Finding a balance

Keeping your finances in order is in many ways the cornerstone of a good credit score: if you ensure you have enough money to repay what you owe on time, every time, it’ll help you avoid any issues in maintaining a good credit history. 


In practice, this is often easier said than done, but building a budget may help. It is sensible to make a list of all your outgoings each month, including bills, rent or mortgage payments, debts you owe from loans or credit cards, as well as the amount you normally spend on groceries and other regular expenditure.


You can then prioritise these outgoings to minimise the risk of anything that could damage your credit rating. Pay particular attention to larger debts or those with higher APR; paying them off first might reduce the overall amount of interest you have to pay.


If your outgoings are greater than your income, then this is potentially risky, and it would be sensible to address this by either an increase in income, or a reduction in your outgoings to restore the balance. The first can be difficult, but there is usually something you can do about the second one – from changing utility providers and shopping at cheaper supermarkets to switching to a more economical car, there's usually some way to squeeze a bit more out of every month.


Managing credit card spending

Credit cards are a popular way to extend your finances, but if they're not used properly, they can lead to more debt and ultimately impact your credit rating. As convenient as they are, it is important to be aware of the costs associated with certain use of your credit card: for example, withdrawing money often incurs an additional handling fee, and going over your credit limit could see you hit with extra charges.


Here are a few pointers on how to get the most out of a credit card, without the extra fees:


Pay your bills on time

  • Regularly paying your monthly credit card bill on time improves your credit rating and stops you incurring fees for late payment. If you're paying by cheque, try to pay at least five working days in advance of the due date to give the cheque time to clear because even if you've sent the cheque, you might still face late fees if the payment hasn't been processed in time, ahead of the payment date. Your statement should give you advice on when to pay if you're paying by cheque or cash. You can also set up a Direct Debit with your bank to help you make regular payments to your lenders on time. You can find more information on the different forms of payment below.


Pay more than the minimum required amount

  • If possible, pay more than the minimum amount that appears on your statement – in fact, paying as much as you can afford will equate to you paying far less interest in the long run. Some lenders may contact you if you only ever pay the minimum amount, as this can be an indicator of financial difficulty.


Keep an eye on your credit limit

  • With most cards, your credit limit will be fixed when you first start using it, and your credit card issuer should inform you in writing of any change to this limit. If you go over your credit limit, you may be charged an overlimit fee, which will in turn increase the amount (including interest) you have to pay off. Going over your credit limit may not have a direct impact on your credit score, but be aware that both your credit limit and your current balance will appear on your credit report. If it's significantly over, this may harm your chances of borrowing money.


Improving your credit score

Once you've balanced your monthly income and outgoings, and ensured that you're using credit cards correctly, you have a good basis on which to start improving your credit score. 


However, that's just the beginning – there could be a number of other things that are affecting your credit score. We'll go through them here: take a moment to watch the video below to find out more.


Things to consider when seeking to improve your credit rating:


One of the first steps to improving your credit score is to find out why it's poor in the first place. Contact the credit reference agency that your lender uses – usually Equifax, TransUnion or Experian – to get a copy of your credit report. You can usually do this through the credit reference agency's website for a small fee.


The credit report should show you the reasons that lenders have considered you a risk. Maybe you've been declared insolvent in the past, failed to pay bills on time or had a County Court Judgement against you for non-payment. In these cases, the most sensible thing to do is carry on maintaining good financial habits, and over time, your credit rating should improve. You may also consider applying for a credit builder card – more on that below.


Check your credit report is accurate and up-to-date

  • Check that the credit reference agencies hold the correct address and other information for you on file and that any information regarding your debts or payment history is correct. If there are any inaccuracies in your credit report, the credit reference agency is obliged by law to update it.


Register on the electoral roll

  • If you are eligible to be on the electoral roll, make sure you're on it. It provides proof of your address and identity, which are two of the things lenders will check. This can be done by registering with your local council.


Keep up positive financial habits

  • If you've missed credit card payments or failed to pay a utility bill recently, you're less likely to be accepted where your credit file shows recent payment difficulty. It may be tough, but try to live within your income and continue checking your credit report every few months – if you're doing everything right, you should see an improvement.


Use eligibility checkers such as Vanquis’ Express Check tool where possible

  • Express Check uses ‘soft’ credit searches. These searches are not visible to companies so they have no impact on your credit score. 'Hard' credit searches can be visible on your credit file for up to 6 months, and too many of these can make you look risky to lenders.


Using a credit builder card to improve your score

It can be difficult to establish a positive track record of borrowing and repaying when providers won't lend you money – even though that's just what you need to do to repair your credit score and gain access to competitive credit again. It's this predicament that credit builder cards like the Vanquis credit card are designed to help you break out of.


Even if you have a bad credit history, you're more likely to be accepted for these specialist products than a mainstream credit card because they are specifically designed for people in poor credit score positions. "Credit Builder Cards" usually have a lower initial credit limit, but they're geared towards proving to lenders that you can manage money responsibly.


As long as you use your card responsibly, stay within your credit limit and repay the amount you owe on time every month, this will be reflected in your credit history. "Credit Builder Cards" can also be a useful first step for people who haven't had debt problems, but have no credit history because they have never borrowed money before.


Find out more about how to build your credit rating with a Vanquis credit card in the video below: