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  • By Tom Philips at May 5, 2023

How to Improve Your Credit Score

A credit score is a number that reflects the creditworthiness of an individual. In other words, it reveals how trustworthy the individual would be when it comes to borrowing money.

Credit scores range from 300-850. The ranking is as follows:

  • 300-579 = Poor
  • 580-669 = Fair
  • 670-739 = Good
  • 740-799 = Very good
  • 800-850 = Excellent.

How Can I Check My Credit Score?

One easy way to check your credit score is to ask your bank. Most banks, such as will have information online about how you can check your credit score with them. For example, there is a page on the Halifax site dedicated to credit score checking (1).

Most of the time, you can do this through online or mobile banking, and it will only take a few minutes to get your score.

You could also get your credit score directly from a credit reference agency. The main agencies are Experian, Equifax, and TransUnion.

Again, this is a very easy online process. Sometimes, a small fee may be required, but this is only if you want to know more than the basics. To get your basic credit score, you do not have to spend a penny.

MoneySuperMarket also offers a credit score check, which they refer to as their Credit Monitor (2).

Please call our 24-Hour Helpline: 0330 058 1579

What Information Do I Need to Provide to Get My Credit Score?

Firstly, you will need to provide some personal details in order to get your credit score. This usually includes your full name and address, but the exact details required will differ depending on which credit reporting agency you are using.

Secondly, you will need to provide some financial information. If you are getting a free credit score, this is usually very basic (e.g., annual income and expenses), but a more advanced report may require you to outline your financial situation in greater detail.

Why Do I Have a Bad Credit Score?

There are many possible reasons for a bad credit score. It is important to note that credit scores can change fairly regularly, and they can be improved, so having a bad credit score does not mean that you will never be able to borrow money.

Some potential causes of a bad credit score are:

1. Not having a credit history

Some young people are very disappointed when they check their credit score and find that it is poor. However, this is to be expected if you have never borrowed money. It is impossible for the credit reference agency to give you a score based on zero evidence of borrowing and repaying money.

You do not necessarily have to loan money to get a credit score. To begin with, you could register on the electoral roll, and you will notice that this counts as part of your credit history.

You could also simply open a bank account. As long as you are handling your money well, this will work in your favour in terms of getting a good credit rating. Avoid using your overdraft, as this can cause you to get a bad credit score.

2. Missing payments

As you can imagine, if you are frequently missing payments, it does not reflect well on your creditworthiness. This is one of the most common causes of a bad credit rating. Unfortunately, the impact of missing payments can last for years, so it is not something to take lightly.

3. Declaring bankruptcy

Declaring bankruptcy is bound to have a negative effect on your credit score, as it makes loan companies reluctant to trust you to handle money responsibly.

4. Opening bank accounts regularly

It won’t do you too much harm to open new bank accounts every once in a while. However, if you are doing this on a regular basis, your credit rating will probably take a hit.

Please call our 24-Hour Helpline: 0330 058 1579

How to Improve Your Credit Score – Equity Release Warehouse’s Top Tips

Below, we outline some tips to help you improve your credit score:

1. Check your credit report for errors

It is important that you check your credit score regularly, both to see whether it has improved/worsened, and to check whether there is any incorrect information on your report.

This involves making sure your information is up to date (e.g., updated address, updated annual income), and checking for small errors in your details, such as a spelling mistake of your house address.

Sometimes, errors on your credit report can stop you from qualifying a loan if you do not identify them before making a loan application. This is especially true if the error is significant, such as a missed payment being flagged up, when you did in fact pay on time.

If you have spotted an error in your credit report, get in touch with the credit reference agency with the error that you have noticed, the correct information, and your contact details. In many cases, they can fix this for you quickly.

2. Stay loyal to your bank accounts

We have already mentioned that switching bank accounts too regularly does not look good on your credit report. Try your best to stick with the same bank accounts, as keeping the same account for many years will work in your favour.

This does not mean that you are only able to have one bank account. Opening up a few different accounts with the same bank can be positive for your credit rating. For example, if you open up a current account, savings account, and joint account with the same bank and use these accounts for many years, it could improve your credit rating.

3. Stay loyal to your home

We know that not everyone will be able to avoid moving house. There are many pressing reasons to move house, from moving out of your parents’ home to moving to a safer area.

However, we cannot deny the fact that moving house too frequently could negatively affect your credit score. This is because it may imply your finances are unstable; you may have to move to reduce your rent/mortgage costs, or you may keep moving workplaces due to money issues.

4. Set up direct debits

If you have several direct debits set up, it can improve your credit score. This is because there is proof that you are capable of paying money to someone on a regular basis, which implies a stable income and good money management.

Additionally, if you have a direct debit set up, you will not miss a payment. Though you may trust yourself to make timely payments, it’s easy to slip up every once in a while, and you do not want to risk this.

5. Get a credit card

Some people believe that it is best to avoid getting a credit card, as it is not always a sensible idea if you are prone to overspending. However, getting a credit card can be a great way to boost your credit score.

If you are using your credit card regularly and repaying the debt on time, it is evidence that you can be trusted to borrow money. If you do this, you need to make sure you can repay the money within the time requested, and that you will remember to do this.

6. Check the minimum repayments of loans before borrowing money

When you take out a loan, there will often be a set amount of money you have to repay per month. If you pay below this amount, you will be penalised, and you may have to deal with debt collectors.

Checking the minimum repayments before taking out a loan improves your credit score as it prevents you from being unable to repay money, which would lead to a poor credit rating.

Please call our 24-Hour Helpline: 0330 058 1579

How to Improve My Credit Score Quickly?

The length of time that it takes to improve your credit score depends on many different factors. One significant factor is the method you have used to improve your credit score.

Registering to vote will have a quicker impact than staying loyal to bank accounts, as the latter could take years to have an impact. However, this doesn’t mean that you should avoid the long-term methods, as they are some of the most effective.

Generally, if you make a small change to your account, your credit score can change in as little as a few weeks. However, some changes take years and years to have any effect.

This is why we encourage young workers to focus on building a good credit history as soon as they can, rather than avoiding it until it becomes necessary, e.g., they want to buy a house.

Why is it Important to Build Your Credit Score?

Firstly, if you have a bad credit score, you could be rejected by many different loan companies. If you are applying to a loan to improve your financial situation, this could result in you having to struggle with money for a long period of time.

You may even be trying to buy a house, but your credit score is preventing you from being accepted. In this case, your entire living situation could be determined by how quickly you can turn your poor credit score around.

Secondly, in some cases, you will be allowed to take out a loan, but you would not have access to certain benefits, such as higher loans and lower interest rates. You may even be charged a higher interest rate, or offered less money, purely because of your poor credit rating.

Another consequence of a poor credit score is expensive insurance. It is common for people with a poor credit rating to have to pay out more for things like car and home insurance.

Renters can also be worse off if they have a poor credit score, as the landlord wants to confirm that they will be trusted to pay their rent every month. They may not be allowed to rent a certain place, or they may be asked to put down a higher deposit to account for their bad credit rating.

Finally, you may be penalised when applying to jobs if you have a poor credit score. Not every employer will check this, but it does happen. Credit checks tend to form part of job applications for roles that involve handling money.

Please call our 24-Hour Helpline: 0330 058 1579

How to Improve Your Credit Score After Identity Fraud

If you have been a victim of identity fraud, it is likely that your credit rating has been negatively affected. You may notice missed payments, new bank accounts, and various other changes that reduce your creditworthiness.

You need to act as soon as possible if you want to regain a good credit score quickly. There is no guarantee that the problems will be fixed very quickly, but you will definitely have your credit score restored in the near future if you report it soon after the fraud has occurred.

The first port of call is your bank. You need to inform them of the fraud, ask them to freeze your cards, and explain the situation in as much detail as possible. They will work to identify suspicious activity on your account, and to ensure the fraudster no longer has access to your money.

It would also be sensible to report the incident on Action Fraud. This organisation will make a report for you, and you can check for updates at any time on your online account (3). Again, you will need to provide them with as much detail as possible about the fraud.

Please call our 24-Hour Helpline: 0330 058 1579

Can You Take Out Loans With a Bad Credit Score?

It is usually much harder for you to take out loans if you have a bad credit score. However, as we have discussed, it may be harder for you to do this. Some companies will refuse to lend to you, and others will demand more from you for the same loan amount.

There are also loans that are designed for people with minimal credit history, or a poor credit score. Some loans you may want to look at are:

1. Budgeting loans

This type of loan is available to people who are claiming state benefits. It allows people to borrow an interest-free loan of up to £812 to put towards everyday living costs, including food and rent.

2. Debt consolidation loans

Debt consolidation loans allow individuals to put all their debt in one place, rather than owing money in various accounts. The reason this is financially beneficial is that the interest rates end up being lower overall.

3. Credit union loans

Credit unions lend money to people even if they have a bad credit history. However, they do have other criteria, the specifics of which vary according to the company you use. They may demand that you first open a savings account with them, or that you live in a certain area.

You can open a credit union with a group of people if you all share something in common, such as working together or living near each other. The benefits are that your credit rating is not as significant for the application, and the interest rates will be much lower.

4. Guarantor loans

When you take out a guarantor loan, you need to appoint someone (known as a guarantor) who can be trusted to repay the loan if you cannot do it yourself. It goes without saying that they need to be creditworthy, so they would need to have a good credit score in order for you to be accepted.

5. Secured loans

The idea behind secured loans is that you borrow against an asset, so if you cannot afford to make repayments, you would give up the asset instead. Some examples of assets you could secure a loan against are cars (or other vehicles) and houses.

Please call our 24-Hour Helpline: 0330 058 1579

Do I Need a Good Credit Score For Equity Release?

We are pleased to say that a good credit score is by no means necessary for equity release. This is because your equity release loan is secured against your home, which reduces the risk of lending for the equity release provider.

Some people have released equity as a way to bounce back from a poor credit score that has rendered them unqualified for most traditional loans. It’s a great way to establish a comfortable retirement without having to wait years to build up your credit score.

It is important to note that a particularly good credit score could improve your equity release application, so we do not want to give the impression that your credit rating is irrelevant. However, for most equity release plans, a poor credit score will not stop you from borrowing money. The same can be said for a low-income.

If you want to know more about releasing equity, contact us on 0330 058 1579. We would be happy to talk you through the process from start to end, including how releasing equity would impact your credit score.

References

[1] Check Your Credit Score https://www.halifax.co.uk/credit-explained/your-credit-score.html

[2] FREE CREDIT SCORE – NURTURE YOUR CREDIT SCORE WITH CREDIT MONITOR https://www.experian.co.uk/consumer/experian-credit-score.html

[3] What is Action Fraud? https://www.actionfraud.police.uk/what-is-action-fraud

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