Even if you are accepted for a card, a poor credit score could mean a lower credit limit and being charged a higher rate of interest. This could also be the case if you have very little credit history, or if you’ve never taken out credit before.
Improving your credit score or building your credit history improves your chances of being accepted for credit. As your score increases, you should find that you’re eligible for more products. You may also find you are eligible for higher credit limits and lower rates of interest. This is because lenders will now have evidence that you can manage credit responsibly.
What is a credit score?
A credit score is the system that lenders use to help them work out whether you’re eligible to borrow from them.
Credit scores are used as part of the application process for all types of credit agreements, including mortgages, broadband contracts and credit cards.
Find out more with our guide to credit scores.
How to improve my Credit Score
If you have a low credit score, there are several things you can do to try improve it.
Register on the electoral roll
Credit checks are used to protect against fraud, so being registered on the electoral roll is a simple way to prove you are who you say you are. Find out more at the UK government website.
Check for mistakes on your file
Your credit score can be wrongly affected if there are any mistakes on your credit file, such as a mistaken missed payment or an incorrect address. Check everything is up to date and fix any mistakes.
How to report and fix any mistakes on your file
To correct a mistake on your credit file, get in touch with the relevant lender and Credit Reference Agency (CRA) to flag the error, and provide as much supporting evidence as possible.
Pay your bills on time and never miss a payment
To show lenders and credit rating agencies that you can manage credit responsibly, make sure you never miss a payment or make a payment late. You could improve your credit score by keeping up with repayments for your credit card, phone contracts and any other goods or services you pay for.
Consider getting a credit-builder card
A credit-builder card - also known as a ‘bad credit credit card’ - is designed for borrowers with a poor credit score or no credit history. When you get a credit card for bad credit, it might come with a low borrowing limit and a high interest rate. This will make it easier for you to pay each month and avoid falling into debt.
Use 'soft searches' when you apply for new credit
Lenders use a ‘soft search’ to give you an initial decision on whether you might be eligible for their credit card. a record of this ‘soft search’ is listed on your credit file for 12 months but other companies can’t see the record. This means it doesn’t affect your credit score. A soft search isn’t a guarantee that a lender will lend to you, but it will give you a good idea about whether you should carry on with the full application. If you do continue, your lender will perform a hard search. This will affect your credit score even if your application is successful.
Remove incorrect or old defaults, County Court Judgments (CCJ) or bankruptcies
If you miss a payment, this will be noted on your credit file for six years. If you miss multiple payments and your account is closed by the lender, this is known as a default. A default will stay on your credit file for six years. CCJs, Individual Voluntary Agreements (IVAs) and bankruptcies will also stay on your account for six years.
If your credit file shows any record of a default, CCJ, IVA or bankruptcy after six years has passed, getting it removed can boost your credit score.
Limit your credit use and reduce your debt levels
Paying off existing debts will help lenders see that you’re managing your credit correctly. On the other hand, almost reaching your card’s spending limit can suggest to lenders that you rely too heavily on credit. This can damage your credit score so try to limit your credit usage.
Why should you improve your credit score?
If you are applying for a loan or a credit card, the lenders will use your credit score to decide whether to lend you money or not. So, having a good credit score can increase your chances of getting approved. It can also help you get a higher limit credit card or cards with lower interest rates. On the other hand, a low credit score may impact your chances of getting approved for a credit card you need.
How long does it take to improve credit score?
There is no concrete answer to this question. How long it takes to improve a credit score depends on various factors that affect your credit score. It might take a few weeks or months before your current credit status is updated on your credit report.
Paying on time and regularly will help you build your credit history. While missed payments or any defaults may negatively impact your score and that will stay on your credit report for a longer duration. Another factor is how quickly your lenders are reporting the account activity to reflect it on your credit report.
Other ways to improve credit score
Here are some other things you can consider for boosting your credit score.
Don't move home too often
Moving several times within a short space of time can affect your credit score. This is because lenders prefer stability and frequently changing addresses can make lenders concerned that you’re struggling to pay rent or bills.
Get bills in your name and pay them on time
If possible, make sure all household bills are in your name, including telephone bills, utility bills and TV subscriptions and keep up to date with payments..
Check if you’re linked to another person
Your credit score can be affected if you’re married to or live with someone with a poor credit rating, if you have any joint accounts with someone who has a poor credit score this can also affect your score. This is because these joint accounts are recorded on your credit file and the other persons. A financial link between you both could make a lender worry that you might need to help them with their finances and credit.
Check for fraudulent activity
If someone is using your account fraudulently, this can damage your credit score. It could also quickly become very serious if it’s not noticed and dealt with before the account defaults.
It’s a good idea to check your credit report for any unusual activity and check your email account for any purchases you don’t recognise. It can also be a sign of fraud on your account if you get bills from companies you haven’t dealt with, or if debt collectors contact you about bills you don’t recognise.
Recovering from credit fraud
If there’s been fraudulent spending in your name, you must immediately contact the relevant lenders and explain the situation. A responsible lender will be sympathetic and they’ll do their best to help you.
You should also contact Action Fraud and get a copy of your credit file from all three main CRA’s, before alerting them to any suspicious activity. You should then add a ‘notice of correction’ password to your credit report, choosing one that nobody else could know or guess.
If a fraudster applies for credit in your name, lenders should request this password before opening a credit account.
Avoid expensive credit repair companies
A number of companies offer credit repair services. Although they are legitimate companies, there’s no need to pay anyone to help improve your credit score. This is because there’s no ‘quick fix’ when it comes to credit repair.