The complete guide to improving your credit score

If you’re trying to improve your credit score, take a look at our guide to help you understand what a credit score is and how you could boost your score.

The world of credit scores, how they work and how they impact your day-to-day life can be confusing for many. That’s why we’ve put together a complete guide to get you up to speed on everything you need to know about your credit score report and how you could boost your score in the future.

What is a credit score, exactly?

A credit score is a number between 0 and 999 that is given to each individual, based on your credit and lending history. This number is held by the three credit agencies in the UK and is used by banks, credit providers and businesses to show how responsible a borrower you are, which can help them to decide whether to offer you credit in the future.

What your credit report really tells your lenders

Your credit report gives lenders an overview of how responsible a borrower you are and gives them a better idea of how much money they may be able to lend you in the future. Your credit report also gives details of:

  • Your current and past addresses
  • Your lenders, and how much money you owe to them
  • Repayments you have made
  • Any IVAs, CCJs or bankruptcy orders made against you

How can I check my credit rating?

It’s a great idea to check your credit rating regularly, to keep on top of where you score and how much you have improved.

There are three main credit agencies in the UK – Experian, Equifax and Callcredit – who all hold a copy of your credit file. As they all calculate credit scores in a slightly different way, you may find that your score differs from each one.

You are entitled to a copy of your statutory credit report, which costs £2, from these credit agencies, but many of them will offer a service where you can access your report for free for a certain amount of time.

Who else can check your credit score?

When you make an application for credit, such as a mortgage, credit card or mobile phone contract, the organisation you apply to will carry out a search of your credit score and report. They’ll be able to see all of the detail on there, and will use this to make a decision about your credit application, such as whether to approve it, how much credit to offer or the percentage interest to charge.

What makes a good credit score?

There is a range of factors that make up a ‘good’ credit score. These include:

  • Not having a large amount of debt
  • Making regular payments towards any debts you have
  • Not having IVAs, CCJs or bankruptcy filings
  • Being on the electoral roll

What makes a bad credit score?

A poor credit score may depend on a number of factors, including:

  • Large amounts of debt
  • Payday loans
  • Unpaid bills or loan repayments
  • Using a high percentage of your available credit
  • IVAs, CCJs or bankruptcy orders

This list is by no means exhaustive but indicates that you are not able to manage your finances well, and you may be seen as an irresponsible borrower.

What kinds of things can affect my credit score?

There are other factors that may impact your credit score in the short and long term, besides those mentioned above. For example, making a number of credit applications over a short period of time may reduce your credit score. Also, it’s important to note that if you have joint finances with anyone, such as a mortgage with your spouse, their financial activity can impact your credit score as well their own.

How long does a bad credit score last for?

Negative activity on your credit record does not last forever. Take a look at the list below to find out how long information stays on your credit report.

Type of activityHow long does it stay on your credit file?
Credit search or applicationTwo years
Late paymentsSeven years
Collections accountsSeven years
BankruptcyUp to ten years
Unpaid tax liensTen years
CCJ and IVASix years

 

If you have an IVA, take a look at our guide to rebuilding your credit here.

Is there such a thing as too many credit applications?

Although the occasional application for credit is a normal part of day-to-day finances, making a number of applications over a short period of time can impact your credit score negatively. However, these searches only remain on your report for two years, and stop being used as part of your score calculation after around 12 months.

I have no credit history but I have a bad credit score – What do I need to do?

If you’ve avoided using credit in the past, but now find yourself struggling to get approved for a loan or mortgage, you’re certainly not alone. Many people think that by avoiding taking credit for as long as possible, it will help to boost their credit score, but often this isn’t the case. If you’ve never taken credit before, lenders will struggle to judge how responsible you are with repayments, so may not offer you credit.

You’ll need to build up your credit score using a tool such as Creditbuilder™, which comes with our prepaid card. With Creditbuilder™, we lend you a year’s worth of card fees up front (0% APR), and with each monthly payment you make, this is reported to credit agencies and contributes positively towards your credit file.

 

Find out more about how Creditbuilder™ could help to improve your credit score

Refused credit: What should I do if my credit application is declined based on my credit rating?

When applying for credit, it can be really disappointing to receive a rejection. Luckily, with most lenders, you should be able to ask for further details about your rejection. Don’t be afraid to ask for as much information as possible – although they may take a while to come back to you with information, it’s invaluable to know why you’ve been rejected for credit. Once you know what the issue is, you’ll be able to take steps to rectify this in the future.

If you weren’t expecting a rejection, it’s worth taking a quick look over your credit report to ensure there aren’t any mistakes, such as incorrect addresses or debts that aren’t yours. If this is the case, you can contact the credit agencies to ask them to remove these errors.

5 myths about credit scores, debunked

There are plenty of myths and rumours floating around about credit scores, so it’s important to separate the fact from the fiction. Take a look at some common myths – and truths – below!

A bad credit score lasts forever

As you’ve seen above, negative marks on your credit file certainly don’t last forever. Even if you’ve been declared bankrupt, this will be removed from your file after ten years, following which you can work towards rebuilding your credit.

You’ll merge credit files with your partner if you get married

Many people think that when they get married, their credit files will join together with their spouses. However, even after you’re married, your finances are completely separate and not joined in any way. On the other hand, it’s worth noting that if you have joint financial products, such as a joint bank account or mortgage, any bad behaviour on these accounts by your spouse will also be reflected in your own credit file.

Employers check credit scores

It is illegal for employers to check your credit score or base a job offer on your credit file.

Having a lot of savings means you’ll have a good credit score

If you have lots of savings, your credit score may still be poor. Your bank balance or savings are not taken into account when calculating a credit score, so it’s worth checking your credit report regularly to keep on top of your finances.

Checking your credit file hurts your credit score

You can check your credit file as many times as you like and it won’t negatively impact your score. Checks by lenders, however, may affect your score, particularly if you apply for a number of loans in a short period of time.

Improve your credit score fast – icount’s credit score checklist

If you’re looking to improve your credit score and get back on your financial feet, then our step by step guide to getting on top of your finances could be just the thing you need! Check out the guide here, or simply work through the steps on the checklist below.

 

Checklist your way to healthy finances

Can a prepaid card improve my credit rating?

Prepaid cards, such as the icount prepaid Mastercard®️, can help you to improve your credit rating in a number of ways.

When using a prepaid card, you can only spend as much as you load onto it. This is a great tool for getting on top of your monthly or weekly budget, and preventing you from dipping into unplanned overdrafts, or needing to resort to high-interest payday loans which can harm your credit score.

With our Creditbuilder™ tool, your monthly payments will be reported to credit agencies, helping to prove you’re a responsible lender as well as potentially boosting your score. What’s more, no credit checks are involved when applying for an icount card, so you’re guaranteed to be accepted.

 

To find out more about our prepaid  Mastercard®, or to apply for yours today, click here
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