How To Fix Your Credit Score
Building a credit score is a necessary part of life in the UK. Your credit rating determines whether you can borrow money to buy a house, finance a car, or even get a mobile phone contract. A low credit score can lead to higher interest rates, and make it difficult to access credit in the future.
It can be tricky to maintain a good credit score, particularly if you have a history of borrowing more than you can afford to pay back. But by changing your money habits and being aware of how your spending affects your credit rating, you can learn how to fix your credit score.
How hard is it to fix your credit score?
Patience is arguably more important than skill when it comes to fixing your credit score.
Improving your credit score can be reasonably simple. But you’ll need to make some changes in how you borrow and spend money, and it will take some time for these changes to have an impact on your credit score.
So if you’re planning to borrow money in the next few years — whether it’s for a house, a car, or another type of investment — it’s a good idea to start thinking about repairing your credit score now.
10 ways to fix your credit score
Here are ten steps you can follow to fix your credit score.
1. Find out what your credit score is
Sign up with one of the UK’s credit reference agencies (CRAs) to see what your current credit score is. This is an important step because it sets a benchmark for improving your credit score.
There are three major CRAs in the UK:
All three CRAs allow you to view your credit score for free, at least initially. You might then need to pay a monthly fee to monitor changes in your credit score.
Other organisations like Credit Karma and TotallyMoney give you free access to your credit score forever.
2. Check the information on your credit report
When looking at your credit report, check all the information carefully. A small error like the wrong house number or the wrong postcode can have a big impact on your credit score.
In addition, credit reference agencies have been known to make mistakes. One Australian reporting agency mistakenly linked a debt notice to an unrelated person who happened to share a surname and apartment building with the debtor. They informed the person’s banks, leading to an immediate and incorrect reduction in their credit limit.
So make sure all the information in your credit report is right. If you find any errors, you can dispute them yourself — you don’t need to go through a credit repair agency. Learn how to dispute a credit report error.
3. Pay off outstanding debts
Aim to pay off as many outstanding debts as you can (without dipping into your emergency fund, if you have one). Prioritise loans and credits cards with high interest rates to reduce the size of your debts.
Avoid taking out a payday loan if you have low credit. Payday loans often have high interest rates that can quickly spiral into more debt. Some CRAs also view payday loans negatively, even if you pay them off on time. So it’s a good idea to avoid payday loans if you can.
4. Reduce your credit utilisation ratio
This sounds complex, but it just means using less credit. Even if you have a credit limit of £5,000, you don’t need to use all of it.
Experian recommends that you use no more than 30% of your credit limit. For a £5,000 credit limit, that would equal £1,500.
The less credit you use, the better your credit score will be. That’s why it’s important to pay off your loans and debts quickly, and try not to max out your credit cards.
It’s also a good idea to avoid withdrawing too much cash if you’re using a credit card. Some lenders will automatically decline someone who withdraws cash over a certain limit.
5. Set up direct debits for bills
Paying your bills on time is a good way to fix your credit score. Set up a direct debit for all your essential bills so they’re paid on time automatically.
6. Be cautious about joint accounts
Your credit score can be affected by those you share bank accounts or a mortgage with. So if your credit score is being brought down by joint borrowing, you may want to consider removing yourself from the joint account.
This can be a tricky conversation to have with the other person. But it can boost your credit score within one month. So weigh up your personal pros and cons for this one.
7. Avoid applying for credit if you’ve been rejected
If you’ve been rejected for a recent credit application, avoid applying for more. Each hard credit check leaves a mark on your account, even if you’re not accepted. So multiple rejected credit applications can damage your credit rating further.
Instead, take the time to follow these steps and fix your credit score before applying for a new loan or line of credit.
8. Register to vote if you’re eligible
Not everyone who comes to the UK is eligible to vote. But if you are, it’s a good idea to register on the electoral roll. Doing this helps lenders confirm your name and address, which can give your credit score a boost.
9. Opt in to Open Banking
Open Banking is a system that allows banks and other financial institutions to share your information, giving them a better picture of your creditworthiness. This can be helpful if you have good money management habits and want to improve your credit score quickly.
It’s not just banks that can share information via Open Banking. Other financial apps may also send signals to credit reference agencies. Use safe money apps to share as much information as you like.
All banks and financial organisations need your permission to share information with CRAs and other organisations.
10. Keep your credit accounts open
Even if you’re no longer using your credit accounts, keeping them open gives a more detailed picture of your credit history. So there’s no need to close down credit card or bank accounts, even if you no longer use them.
Improving your credit score FAQs
Now you know how to fix your credit score, here’s some additional information that can help you plan your financial future.
How is your credit score calculated?
Credit reference agencies use automated systems to create your credit score. These systems look at lots of different factors to build a picture of your reliability as a borrower.
How long does it take to fix your credit score?
It usually takes at least a few months to see substantial changes to your credit score.
As you can see from the diagram above, your payment history is the most influential factor in determining your credit score. It takes time to build up a positive payment history, especially if your credit score is currently low.
It can even take years to improve your credit score to the levels you want. So it’s important to start thinking about your credit score now, even if you’re not ready to get a mortgage or take out a loan yet.
Do credit repair agencies work?
Credit repair agencies aren’t usually worth using. You can do most of what they claim to do by yourself for free — such as all of the actions listed above.
If you’re considering paying to improve your credit score, a better investment might be Experian Boost. This links your credit report to accounts that require a regular payment (such as Netflix, Spotify, and your council tax bill). This gives Experian a more rounded picture of your payment history, so they can give you a more accurate credit score.
Learn more about building credit in the UK
If you’re new to the UK, you might not have a credit score here yet. You can’t port a credit rating from another country, so find out everything you need to know about building a UK credit score in our credit score FAQs.