How to Improve Your Credit Score

When you start taking your first steps on the mortgage journey, we all know saving up for a deposit could be a long and tedious endeavour, but there is another factor you need to address. An unfavourable credit score will affect your ability to gain the best possible mortgage options, with the process of fixing your credit score certainly a marathon and not a sprint. To make it a little easier, we’ve broken down each step to ensure you have a higher credit score when the time comes to apply for your own mortgage.

By having a higher credit score, it means lenders and companies will see you as a lower risk and more likely to approve you for credit. The benefits of improving your score include;

  • Lower interest rates.
  • Higher credit limits.
  • Access to more offers.

There is not a single universal credit ‘rating’ or ‘score’ that a lender will use. Each of the UK’s three main credit reference agencies has a scale for what it considers a ‘good’ or an ‘excellent’ credit score.

  • Equifax – 420 to 466 is good / 467 to 700 is excellent
  • Experian – 881 to 960 is good / 961 to 999 is excellent
  • TransUnion – 604 to 627 is good / 628 to 710 is excellent

If you have a low or ‘bad’ credit score, you’ll more likely find you are turned down when you apply to borrow money and should take steps to improve your score.

  1. Check your credit report regularly

Check your credit report regularly and especially before any major application, to ensure all the information it contains is correct and up to date. Your credit report held at Equifax, Experian and TransUnion, contain enormous amounts of data on you. Errors can happen and they can harm your applications. If you notice any mistakes, it’s important to get them rectified as soon as possible.

  1. Check addresses on old accounts

If you have a credit card or an old mobile phone contract that you no longer use but it is still active, check the address is listed as your current one. Mortgage applications can be rejected because of this due to ID checks.

  1. Register to vote

The electoral roll is a key part of the identity checks for lenders and is used to confirm that you live at the address given in your application. If you’re not on the electoral roll, it’s much harder to get accepted for credit, registering to vote can boost your score by as much as 50 points!

  1. Don’t miss or be late on any repayments

Sometimes it is easier said than done, but if you are facing difficulties inform your lender in advance, as it’s better to seek their help than to repeatedly miss loan or credit card repayments with no explanation. One late payment on a credit card or loan can dent your score by as much as 130 points! A missed payment will show on your report for six years, although its effect will lessen. Showing that you can repay on time and stay within the credit limit you’ve been given will help convince lenders you’re a responsible borrower.

  1. Don’t withdraw cash on credit cards

Many lenders see it as evidence of poor money management, as it is expensive to do and you will be charged a higher interest when you repay.

  1. Use a credit card little and often

Spending small amounts and paying off your bill each month is key to building your credit score, as it shows you are reliable to pay back any money you borrow.