Improving Your Credit Score

MoneyHelper

Credit cards are a common sight in people’s wallets. But it’s easy for them to be misunderstood. There are interest rates, minimum payments, credit ratings and the application process itself.

We explain all the tricky points of how credit and buying things on credit works so you can stay on top of it and make sure it works for you.

So if you’re not sure how to find out your credit rating or how to improve it, what’s the best way to pay off your credit bill or just want to know the basics about borrowing money, you’ll find it all here.

Building a good credit score is important because it can affect your ability to borrow money or access products such as credit cards or loans. You can check your score for free and if it isn’t in the best shape, there are things you can do to improve it.

Improving your credit score with additional information

Rent payments

Adding evidence of keeping up with rent payments helps people build a credit history without having to enter into new credit agreements to enrich their credit record information.

Previously, landlords didn’t provide rent payment information to credit records. However, social housing providers, larger property management companies and private landlords can now add information showing that you’re keeping up with rent payment information to Experian credit reports via the Rental Exchange scheme.

However, if you miss payments, this will have a negative effect on your credit file and score.

Open Banking

The nine largest UK-regulated banks have to allow you to share information about your current account transactions, including all your outgoings and income, with other organisations, including other lenders. This information is called open banking data.

Sharing this information can often help lenders make more accurate decisions about what you can afford to borrow and whether to lend you money, and this might help you to borrow money at a more affordable price for you. Credit reference agencies are now offering customers the opportunity to share this information through their credit records.

Your bank can only share this information with your explicit consent.

Experian Boost

Experian credit reports use Open Banking to include information such as loans, credit cards, mortgages, mobile phone contracts, bank accounts and even some regular household bills such as energy, water and broadband – subject to your consent. The range of information that you’re able to share will depend on which of your creditors are participating in the Experian Boost scheme.

The Experian Boost initiative also lets you add your Council Tax payment records, video/music streaming subscription payments (such as Netflix, Spotify and Amazon Prime), and savings information to Experian credit scores.

Find out more on the Experian website. Or, tenants can add their own information through one of Experian’s partner organisations – Credit Ladder or Canopy.

Equifax Financial Health Index

The Equifax Financial Health Index uses information from Open Banking or the information that customers supply themselves, which they combine with existing credit record information, to develop a fuller picture of customers’ financial circumstances.

The Financial Health Index lets you add information to your credit records about:

  • Council Tax
  • insurance
  • savings and investments.

The Index can also fill in credit information gaps, by including information such as rent and utilities payments.

There are other credit reference agencies joining the market, such as Credit Kudos, which also take Open Banking into account.

Consider getting a credit-building card

If you have a poor credit history, you might want to think about getting a credit-builder credit card. These are cards designed for people who either have made little previous use of credit or who have a bad credit history. But credit limits on these cards are often low and the interest rates are high. This reflects the level of reassurance your credit file information provides to lenders.

By using these cards and paying off the bills each month, you can help prove you’re creditworthy, increase your credit score, and apply for other cards and loans when your credit rating improves.

But be aware that the interest rates charged are much higher than standard credit cards. Typically, you’ll be paying over 30% in interest a year, which is another reason to try to pay off any balance in full each month. Otherwise, you might end up in debt that you struggle to get out of, which could harm your credit rating even further.

Avoid expensive credit repair companies

You might see adverts from firms that claim to repair your credit rating. Most of them simply advise you on how to obtain your credit file and improve your credit rating – but you don’t need to pay for that, you can do it yourself.

Some might claim that they can do things that legally they can’t, or even encourage you to lie to the credit reference agencies.

It’s important to not even consider using these firms.

How to report and fix any errors on your file

If you do spot any mistakes, challenge them by reporting them to the credit reference agency. They have 28 days to remove the information or tell you why they don’t agree with you.

During that time, the ‘mistake’ will be marked as ‘disputed’ and lenders aren’t allowed to rely on it when assessing your credit rating.

It’s also best to speak directly with the credit provider you believe is responsible for the incorrect entry.

Credit reference agencies rely on information provided by lenders – and the lender often is in the best position to resolve this.

Negative information in your name usually stays on your credit report for six years and can’t be removed sooner if it’s accurate. However, if there were good reasons why you fell behind with payments that no longer apply, such as not being able to work during a period of illness, you can add a note to your credit report to explain this. This note is called a Notice of Correction and can be up to 200 words long.

Additional Reading

Useful resources

Social Security benefits and welfare reform is a core area of training at Advice NI. We...
We are the leading provider of nationally accredited Advice and Guidance, Legal Advice...
Mental Health & Money Advice is the first UK-wide online advice service designed to...
Would you like to feel more in control of your finances? Then let us help you cut through...
If you're struggling with debt or other money problems and need to get through a period...
Advice NI can offer in-house training and/or workshops at a time, date or location...
We have offered accredited and non-accredited training in age issues since 2008 including...
No time for a phone call? You can now get in touch with MoneyHelper using Whatsapp. The...
Our Workplace Gambling Workshops are facilitated by Tony O'Reilly, addiction counsellor...
The Consumer Council would welcome the opportunity to engage with your employees by...
Advice NI, a registered charity founded in 1995, exists to provide leadership and...
Advice NI is the leading provider of Debt and Money Advice training in Northern Ireland...
Our free Budget Planner puts you in control of your household spending and analyses your results to help you take control of your money.
Use this calculator to see how much a loan will cost you or how quickly you can pay off...
Our Money Navigator tool gives you action plans based on your own situation. Know in 30...
If you’re struggling with debt, it can be hard to know where to turn. But with lots of free advice services available across the UK, you can find help in a way that’s best for you.
Learn how to get your debts under control. Take our test to work out and determine your...
Use this calculator to see how much a credit card will cost you or how quickly you can...
Are you saving for a future bill? A new TV or car? Or just to have a bit in the bank?