So you’ve signed up to a credit-checking agency and discovered that you have a bad credit score. Well there’s no need to panic quite yet.
It may come as a bit of a surprise, but lenders cannot actually see this score.
What matters is whether you have any negative marks on your credit history. And this is what you should look to improve, especially if you’re hoping to take out credit in the future.
Now we know this is a subject that’s hard to get to grips with, but we’ll try to clear things up for you.
Let’s look first at why you’re given a credit score.
What’s the point of a credit score?
The thing is, your score reflects how a particular credit-checking agency views your credit history. Your score is calculated from your record of borrowing and how it measures against their own criteria.
Your score with one credit-checking agency will differ from your score with another. This is why it’s impossible to pin-point what the ideal credit score is.
What all credit-checking agencies and lenders will see is if you’ve had problems with borrowing in the past. But the good news is if your credit history is less-than-perfect – they’re ways you can improve it. If your score increases over time, you know that your credit history is gradually improving.
How do I improve my credit history?
Your credit history details all your borrowing activity over the last six years or so. And if there are any negative marks on there - perhaps you’ve been late or even missed previous payments – future applications for credit will be affected. This is why you should look to improve it.
Keeping up with your repayments is vital to rebuilding your credit history. Paying what you owe – whether that’s your rent/mortgage or credit card repayments - on time will show lenders that you’re a responsible borrower. Make sure you also keep a tab on your other outgoings like your utility bills and mobile phone contract. These can too affect your credit history.
"If lenders see a number of applications for credit over a short period, they may too reject you."
Updating your address and signing up to the electoral roll will help improve your credit history. This is especially useful for those who haven’t borrowed previously and have no credit history because of this. Up-to-date information can help lenders confirm your identity
If you’ve previously taken out credit cards and are no longer using them, it could be worth closing these accounts. Lenders will look at how much credit is available to you when you apply, and even if you have an account you’re not using, they could include this in their calculations.
When you’re planning to take out credit, it may be worth waiting until your credit history has improved. Every time you apply it leaves a footprint on your report, regardless of if you’re accepted or rejected.
If lenders see a number of applications for credit over a short period, they may too reject you as they might conclude that you’re desperate to borrow money – which makes you look like a risky customer.
How do I check?
When you apply for credit, lenders will use one of the three main credit-checking agencies – Experian, Equifax or Callcredit – to access your credit history.
Each of these offers a free credit-checking service you can sign up to and make sure all information held about you is correct. Plus, you can keep an eye on your credit history to see whether it is improving over time. Head here to find out more about these free services.
We hope you’ve found our tips on improving a bad credit score useful. If you plan to apply for credit, make sure you weigh up your options. Competitive interest rates are typically offered to those with a flawless credit history, so it may be worth holding off applying until your credit history has improved.
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