How to improve your credit score

Discover four ways to boost your credit score

Iona Bain – Virgin Money Living Mentor

by Iona Bain | Independent Money Mentor

Founder of the Young Money Blog and author of Spare Change

We're not all amazing with numbers. But if there's one set of digits we've got to be hot on, it's our credit score. It can make all the difference with our finances.


Well, maybe you’re eyeing up a new car, or trying to land a mortgage for your first home. If so, borrowing could help you achieve your goals, with banks currently offering some personal loans below four percent and mortgages below two percent.

But in reality, the average rate people borrow at is a lot higher. The reason? The best rates are reserved for those with the best credit scores.

Your credit score is based on a behind-the-scenes assessment of how safe a borrower you will be. In other words, how likely are you to repay on time, or at all? Lenders use credit reference agencies to research your borrowing history, using various sources. Each fact about you is given points, and the higher your number, the safer you are to lend money to.

When you apply for credit, you need the best score possible. Sadly, one in five people who apply for cards, loans or mortgages fail to secure it. So here are four ways to boost your credit score.

Check your file

It’s easy to check out your current credit report to see how well you’re doing. Just sign up for free membership of a credit reference agency like Clear Score or Noddle to keep tabs on things. Or you could choose the more familiar Experian, Equifax or Call Credit but watch out for subscription fees when free trials come to an end.

Go over your report with a fine tooth-comb. ls it up-to-date and accurate?

Check for silly mistakes on your file: even having just a slightly wrong address can have an impact on your score.

Has there been any fraudulent activity? If something on your credit report is incorrect or doesn’t apply to you, someone may have applied for credit in your name without your knowledge. Identity fraud is a booming industry.

Ask for any errors to be changed or removed, and submit a note if there any special circumstances which need explaining.

The credit agency is legally required to review any issues you raise. And any negative information should only remain on your record for six years.

Finally, have you ever applied for credit jointly with a partner – or more worryingly, an ex-partner – who may not have the most brilliant credit score? If so, you need to take that up with the credit agency and try to remove it from your report.

Do your homework

One no-brainer is to check you are on the electoral roll. If not, contact your council and register. If your name’s not on there, you’ll find it much harder to get credit. You can register to vote online or by post.

If you are not eligible to vote, the credit reference agency will want proof of your identity and residency instead. And when applying for a loan, credit card or mortgage, make sure you get the ‘how long you have lived at your current address?’ question right.

That’s because having a settled period at the same address will help, according to the Money Advice Service.

Draw up a list of lenders who offer a ‘soft’ search online. That means you can fire off fact-finding applications to test the water, without any of them showing up as a nasty red mark in your credit history if they come back negative. Lenders don’t like to see multiple applications in a short time, as it suggests you are being rejected for credit even when you may not be. Soft search options or credit checkers can help you avoid this.

If you have had borrowing problems in the past, choose your lender carefully. Some will accept a chequered history, others won't. Their websites should tell you what they are looking for.

Review your credit

Get inside the mind of your lender. There’s nothing mysterious about this; just bear in mind that they’ll want to see a history of paying bills on time and repaying your current borrowings.

Lenders are interested in the amount of debt that you have, and whether, in proportion to your income, you can support further credit without compromising your commitments and lifestyle.

But remember even a single missed mobile phone payment can hurt your credit profile and make a dent in your score.

Take an overview

If you feel you are struggling to improve your score at the present time, take a step back. Are you actually ready to borrow what you are looking for? Or might you be kidding yourself that you can take on all that new credit without working on your budget behind the scenes?

Your income might be too low to support a chunky new outgoing.

Outside of winning the lottery – which is not a great basis for financial planning – you’ve got a couple of options. You could borrow less, though that might torpedo your plans. So why not try reducing your spending?

Discover the joys of budgeting, reviewing where your money actually goes each month. Behavioural psychologists have found that many of us actually get as much of a kick from finding savings as we do from spending.

Set limits for each area of expenditure. Are there any luxuries that can be pruned right away?

By doing this, you are on the way to building a stronger financial profile.

And remember – it makes sense to borrow only when you really need to.

(PS – if you found this interesting, why not learn more about budgeting?)

Before making financial decisions always do research, or talk to a financial adviser. Views are those of our mentors and customers and do not constitute financial advice.