A Guide on How to Improve Credit Score in the UK

With credit cards being relentlessly sought after in this day and age, the term 'credit score' seems to be the cornerstone of every credit-related discussion. Before we get into how to improve credit score in the UK, you ought to know what it is and why it is in demand.

What is a Credit Score, and What is its Significance?

A credit score is at its base, a statistical number using which you can evaluate a borrower's credit history.

Lenders generally use credit scores to evaluate your chances of paying back your loans. A credit score ranges from 300 to 850. The higher your credit score, the higher your chances of securing a loan as the banks are likely to trust you more.

When you apply for a loan in the UK, lenders check to see if you are a financial risk by evaluating your creditworthiness, which is why it is vital to know how to improve your credit score in the UK. Lenders generally determine your creditworthiness from a variety of Credit Rating Agencies (CRA). The leading CRAs are Experian, TransUnion, or Equifax.

To draw up your credit scores, CRAs use the following information: your payment history, credit usage, credit mix, missed credit payments, foreclosures, and so forth. Different CRAs have different ways of giving you a credit score.

For instance, Experian’s credit score ranges from 0 to 999 with 0 being the least, TransUnion’s credit score generally ranges between 300 and 850. The higher the number, the better your credit score. Equifax's credit score range from 0 to 700.

Banks offer you deals on loans based on the information they get from CRAs. If you have what they consider is a good credit score, you can expect to get a loan at a relatively low interest. Also, banks are likely to allow you to take out a more significant loan amount.

However, if you have a poor credit score, you may still get a loan but at a substantially high-interest rate. Also, the loans you will be eligible for will be smaller amounts as the bank probably considers you a high financial risk. In some cases, you may not even get a loan. Considering the role of credit score while applying for a loan, you ought to make sure you know how to improve your credit score in the UK.

How to Improve Credit Score in the UK?

If you are unsure as to how to improve your credit score in the UK, be sure to do the following:

Make your Payments on Time

This should go without saying, but making your payments on time is, by far, the simplest and one of the most effective ways of improving your credit score in the UK. Clearing credit card debt on time can help you convey to the bank that you have strong creditworthiness.

Avoid Performing Multiple Credit Checks

You need to have an above-average credit score to get the loans you want. However, the act of checking credit score itself can reduce your credit score. Frequenting different banks in search of a loan and having them check your credit score can negatively affect your credit score.

Close the Accounts that are no longer in use

If you happen to have any accounts that you no longer use, you are better off closing them.

CRAs will not be able to access any information on your residual balances in your old accounts. When required, they will consider this before finalizing your credit score.

Building your Credit using a Prepaid card from a Credit Builder

Here is another thing you can do if you do not know how to improve your credit score in the UK.

Credit Builder was put in place to help people by showing them how to improve their credit score in the UK. This proves to be one of the most straightforward solutions to how to improve your credit score in the UK.

Customers pay a monthly fee, which is automatically debited from their bank accounts. This fee is declared to CRAs every month for twelve months as a payment of interest. During this period, you can expect your credit rating to have improved.

Getting listed on the Electoral roll

Getting listed on the electoral roll is another answer to how to improve your credit score in the UK. Lenders and CRAs generally check to see if you and the details you provide are genuine.

It also helps if you have a fixed residential location, have had the same job and bank account for a considerable amount of time without change.

How Long to Rebuild a Credit Score?

The time required to rebuild credit history primarily depends on the reason the credit history was affected. When going about how to improve your credit score in the UK, keep the following in mind

  • Delinquencies are known to remain on your credit report for up to seven years.
  • Public record incidents also stay on your credit report for seven years. However, it may reflect for up to 10 years in case of bankruptcy.
  • Any other inquiry can be expected to stay on your report for two years.

When you go about how to improve your credit score in the UK, do keep in mind that rebuilding your credit score can take a significant amount of time. An excellent way to begin is by checking your Fair, Isaac, and Company (FICO) Score from Experian.

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