Your credit rating affects your ability to borrow money and access products such as credit cards, mortgages, loans and mobile phone contracts. Therefore, it’s important to be aware of your credit rating and understand what can be good and bad for it. So, to help improve your credit rating, we’ve put together our handy guide below:
What is my credit rating?
Your credit rating (also called credit score) is a number calculated to show how you manage your finances and helps lenders make decisions on whether you’ll be able to pay the money back.
Your credit score is based on quite a few different factors, such as whether you’ve missed any repayments in the past, your income and even who you are (e.g. not being listed on the electoral roll can have a big impact on your score).
Whenever you make an application for a credit agreement (e.g. a loan, credit card or mortgage), the lender will assess your application form and check your credit history with at least one credit reference agency. The lender will then use all of this information to allocate points according to their own systems and preferences. The total number of points is your credit score. The higher your credit score – the more inclined lenders will be to lend you money as you are perceived to be a low risk. Therefore, the lower your credit score – the more likely you are to be refused.
What is a Credit Reference Agency?
A credit reference agency can provide information about your credit history on request and the three main agencies in the UK are Callcredit, Equifax and Experian. These agencies pull information from court records and the electoral roll and will also examine other lenders’ records who have searched your file when a credit application has been made. They’ll consider any other people you have a financial association with, as well as any other addresses you’re linked to. This information helps them determine whether to provide the loan.
How do I check my credit rating?
You can see a copy of your full statutory credit report for £2 which will provide you with up-to-date information. You can simply request this from one of the three main credit reference agencies (contact details are noted below). All three agencies might hold different information on you, so it’s worth contacting each individually.
By phone: 0844 335 0550
By post: Equifax Credit File Advice Centre, PO Box 1140, Bradford, BD1 5US
By phone: 0844 481 8000
By post: Experian Ltd, PO Box 8000, Nottingham, NG80 7WF
How do I improve my credit score?
If you have a bad credit rating or have failed to qualify for the products and services you want, then these tips could help increase your credit score:
Check your credit report with credit reference agencies.
Make sure all the information held on you with the credit reference agencies is accurate. This information forms an important part of any credit score, so you need to correct any mistakes as soon as possible. Even a slightly wrong address can have an impact on your score. It’s also important to ensure that settlements of past debts (e.g. Court Decrees) are noted on your credit file otherwise you could be wrongly rated by lenders.
Prove to lenders that you’re capable of managing your finances effectively.
You can do this by:
– Opening and paying a phone landline or internet contract on time
– Using one or two credit cards or store cards to show lenders you can manage credit responsibly.
– Applying for a Secured Against Savings Loan with Glasgow Credit Union. This loan allows you to borrow against the savings you hold with us. For example, if you have £500 in savings, you can borrow £500 secured against this amount. No credit check is required for this type of loan. If you make the repayments on time, it will allow you to rebuild your credit score over time. The minimum Secured Against Savings Loan is £500 meaning you need to save £500 before you can apply for this. Terms and conditions apply. Find out more here.
Always make payments on time.
Missing loan repayments, credit card repayments, or mobile phone bills will damage your credit score significantly.
Register to vote on the electoral roll.
Prospective lenders and credit reference agencies use the electoral role to check you are who you say you are, and you live where you say you live. Registering to vote will improve your chances of being accepted for credit. You can register to vote online or by post. Living at the same address, being employed with the same employer, and having the same bank account for a reasonable period of time will also help.
Close unused credit card accounts.
Future lenders might view you as high risk if you have accounts open with high credit limits that you no longer use. Closing these should help to improve your chances of securing a loan or credit.
Check if you are linked to another person.
Having a spouse, friend, or family member’s credit rating linked to yours through a joint account could affect your personal rating if they have a poor score.
High levels of existing debt.
Reduce or clear any outstanding debt before applying for new credit, such as a mortgage. Lenders might be hesitant about lending you more if you already have a lot of existing debt.
How long will it take to improve my credit score?
Your credit history is built up gradually as you increase the number of payments made on time, demonstrating to lenders that you are a ‘good risk’ and capable of managing your finances. After six years, most negative marks on your file, such as late payments and County Decrees, will be removed from your credit report.
What is a good credit score?
Each lender has their own standards for credit score ratings. It’s likely that if you have a good score with one of the main credit reference agencies, then you’ll have a good credit score with most lenders. According to the Money Advice Service, a good credit score with:
Call Credit is scoring 4 out of 5
Equifax is scoring over 420 out of 700
Experian is scoring over 880 out of 999
However, it is worth noting that your credit score doesn’t guarantee that you’ll be approved for credit or offered the lowest interest rates. This is because a lender’s decision is not made solely on score.
Where to go for debt advice?
If you’re struggling with debt there is lots of free advice available to help you take control of your finances:
StepChange Debt Charity www.stepchange.org
0800 138 1111
StepChange helps change the lives of thousands of people every week. Their expert advice is impartial and personalised to each individual situation.
Citizens Advice Scotland www.cas.org.uk
0808 800 9060
Citizens Advice Scotland helps more than 300,000 people solve their money problems each year in communities ranging from city centres to the Highlands and Islands.
Debt Advice Foundation www.debtadvicefoundation.org
0800 622 61 51
Debt Advice Foundation is a national debt advice and education charity offering free, confidential support and advice to anyone worried about debt.
National Debtline www.nationaldebtline.org
0808 808 4000
National Debtline has helped millions of people with their debts. They’ll talk you through options and give clear advice on how to take back control.
0800 280 2816
PayPlan provides the debt advice and support to enable you to take charge of your finances and focus on living again.
We’re committed to working with members, local organisations,
and employers to increase financial awareness in the wider community.
If you have any questions or would like help with any of our services, please contact us on 0141 274 9933.
Please check first that you are eligible to apply:
You are aged 18 or over
You have a UK bank account in your own or joint names
You are a permanent UK resident
You have never been bankrupt or had a Court Decree
To complete your application you will need:
Your current employer's address details
Details of monthly income and outgoings
Bank or building society details (sort code and account number)
To enable us to make a decision on your loan application we will contact Credit Referencing & Fraud Prevention Agencies. This will register a search against your credit record and if your application is successful we will share the information we hold for you with these agencies. Further details are available in our Fair Processing Notice
It is important that you read the Fair Processing Notice document above. If there is anything that you do not understand, please contact us.
Please be aware that the longer you take to pay back a loan, the more you will pay back in interest. If you go for a shorter term your monthly repayment might go up, but you'll save in interest and pay back your loan faster.