Credit scores are an important tool that various lenders use to judge whether they can lend to someone or not, and whether they are likely to repay the amount on time.
Credit scores are made up of key pieces of information about you, such as payment history, previous borrowing and court information. The higher your credit score, the higher your chance of being approved for credit.
Having a low score does make it harder, but there are some ways to improve your score and increase your chances.
1. Check and correct your credit report
Before you can make any changes, you need to take a look at your credit report. There are four main agencies you can use for free.
Give your credit report a careful check. You may notice there are errors which are affecting your score. Outdated information can also have an impact. If you notice any issues, contact the credit report agency and they will investigate.
2. Make all payments on time and keep borrowing under control
Lenders look at repayment history, so make sure any current payments are on time. This applies to bills, loans, car finance and any other credit agreements. Showing that you can be consistent and responsible works in your favour when looking to borrow more money.
The same goes for staying within the limits of any credit. When lenders set a maximum limit, they need to be shown that you are on top of your finances enough to be aware of and stay within the limits.
3. Register on the electoral roll and show stability
Registering on the electoral roll is an easy, quick process that can improve your credit score with very little effort. Not only does it mean you can vote in any elections, but proving your current address helps to support your loan applications.
Being able to show stability in your life, such as staying in the same address, further bolsters the idea that you are a responsible borrower as well as verifying your identity.
4. Build a credit history and keep your credit use low
Having a credit history, even a short one, signals to lenders that you are able to be accurately assessed when you apply for a loan. Here, lenders can see how much you have borrowed, your repayment accuracy and any default payments.
One way to build a credit history is to use a low-limit credit card responsibly. This helps to demonstrate good repayment behaviour. If you can, keep your credit usage below 30% of the credit amount.
5. Limit hard credit applications and avoid risky credit-builder products
Every time an application is made for any type of credit, it triggers a hard search on your file. Whilst this isn’t instantly bad, too many applications in a short period can harm your credit score. Stick to applying as infrequently as possible if you can.
Although tempting, avoid high-fee or unregulated products which claim to build your credit score. Not only are these risky financially, but they are ungoverned, meaning any issues will be difficult to investigate.