How to improve your credit rating and get the best deals


Updated on 12 March 2019

If you're struggling to get hold of credit, find out how to improve your credit rating and with it your chances of getting accepted for better deals.

Paying rent now helps your credit rating

Paying rent can now help build your credit profile - but you'll need to take action to make it happen.

Credit agency Experian has set up the Rental Exchange, where landlords can report tenant's rent payments, which counts as a positive on their rental file.

Four in five tenants who have their rent reported would see an increase in their credit rating, Experian estimates.

The move came as a response to complaints from The Big Issue that whilst mortgage payments are counted on your credit profile, rent payments were not.

If you are a council or social housing tenant, or with a large landlord or lettings agent, you should ask them to report your rental payment data to the Rental Exchange.

If you're with a smaller landlord, you can use CreditLadder or Canopy, which are free and report your rent payments to Experian. 

How do I get out of debt? Cheapest ways to pay off what you owe

Get on the electoral register

If you’re not already on the electoral roll, get on it.

The electoral roll is used by lenders to check that you live where you say you live. It also bodes well if you’ve stayed at the same address for a number of years as lenders prefer stability. Registering on the electoral roll is free and enables you to vote and take part in jury service.

Get a bank account

If you don't already have one, apply for a current account.

If you've never had credit before, this can help you to build up a relationship with your bank, and once you've done that, your bank is more likely to offer you an account with an overdraft facility which, providing you keep within your limits, will help you collect some positive credit history.

Worried about the temptation of an overdraft? Apply for a basic bank account with no overdraft option.

Be aware that some basic bank accounts charge a monthly fee but you should be able to open a free one. And you should definitely not pay someone to open a bank account for you.

Your bank may then later be more willing to offer you a credit card or a loan.

Check your credit report

Before you apply for any credit, give your credit report the once-over. If you're worried about how much this might cost you, don't be.

There are three main credit reference agencies in the UK: Experian, Equifax and CallCredit.

You can sign up for free 30-day trials of your credit report from Equifax or Experian. Just remember to cancel your membership before the 30-day trial period is up to avoid being charged in the future.

You can also get lifetime access to your CallCredit credit report via its Noddle website.

Experian offers a free credit score service too. It's fairly basic, telling you what your credit score is, what band it fits in and whether it's good or bad.

On top of that, the service features a Credit Matcher which will tell you what financial products you're likely to be eligible for using a 'soft' search which won't affect your credit score. 

For a free ongoing Equifax score, ClearScore is a website and app gives you your score and updates it every 30 days. It can coach you on ways to improve your credit score and offers personalised credit card and loan offers.

Using one of these services, you should still be checking your full credit report regularly to see if everything is up to date and accurate.

If there are any mistakes on your credit report, get them corrected. This could be an incorrect address or an account which is listed as being open when it’s closed.

You can do this by contacting providers and asking them to correct it. Alternatively, you can contact a credit reference agency and ask them to contact the provider on your behalf.

If you’ve already had credit in the past and perhaps missed a few payments due to illness or redundancy, you can also add a 200-word statement to the credit report to explain this.

This is called a ‘Notice of Correction' and it may help the lender to look more favourably upon you. You will need to contact a credit reference agency with the statement and ask them to put it in your report.

 Close unwanted accounts

Did you know that the amount of credit you have available to you can also negatively impact your credit rating, even if you have no debt?

This is because lenders see you have the potential to borrow lots of money and get into debt, even if you never do. There's also a greater possibility of fraud, as in theory you won't be checking your statements regularly.

So if you have lots of bank accounts and credit cards you never use, close them.

Detach yourself from others

The people you live with won’t have any impact on your credit rating, UNLESS you’re financially linked to them. So if you share a mortgage or a bank account with someone, your credit history will be connected.

Bear in mind, however, that this is still the case even if you DON’T live with them.

So if you have any ex-partners lurking about and you no longer want to be financially connected, make sure you detach yourself from any joint accounts or borrowings and check your credit report reflects this. That way, future applications won’t be affected by whatever the other person is doing now.

Limit your applications

If you’ve been turned down for credit, don’t think that you’ll solve the problem by making lots of other applications – you won’t.

Every time you apply for credit it leaves a ‘footprint’ on your credit report and if lenders see a lot of these over a short period of time, they are less likely to want to lend to you as they may believe you’re overstretching yourself financially.

It’s far better to simply ask for a quotation to find out what kind of offer you might get, before ploughing ahead with an application.

Borrow (and pay it straight back)

Ultimately a credit rating assesses how likely you are to pay off a debt, so why not show them you can?

Traditionally you would do this with a credit builder credit card. These are designed to help people who've had debt problems in the past.

They do have high interest rates, so you should make sure you're paying the balance off in full each month and - crucially - limit your spending accordingly.

Another way to do this is to use a buy-now-pay-later service like Laybuy. This allows you to pay off certain large purchases in weekly instalments and you can apply even with very little credit history; you just won't be able to borrow as much.

There are serious drawbacks to services like Laybuy, and late payment results in fees and a potential hit to your credit score, so use with care and only for items you were going to buy anyway.

Pay up on time

If you do get hold of credit, make sure you always pay up on time and keep within your credit limits.

There’s no point being offered a credit card, only to continually forget to pay off your bill or go well over your limit. If you do this, your credit rating will go down, not up, because you’ll be regarded as unreliable.

And that goes for your other bills too, from your mobile phone contract to your Council Tax. The more payments you miss, the further your credit rating will dip.

Finally, don’t forget to check your credit report on a regular basis to see where you stand and whether it's improving. Once it’s looking healthier, you’ll be able to apply for more credit.

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