MoneyMagpie Editor and financial expert Vicky Parry shares hacks to boost your credit score fast
Your credit score determines how easy it is to get lines of credit, whether that’s a mobile phone, car hire contract, bank account or credit card, or even a mortgage.
A low credit score can impact your ability to get loans or lines of credit that you need, but sometimes improving your score can seem like a mountain you have to climb. Follow these steps to make sure your credit score rockets as fast as possible.
Don’t close your credit card
When you pay off a credit card in full and want to get completely out of debt, it’s tempting to close your credit card so you’re not tempted to use it again. Don’t!
There is a somewhat backwards theory to credit scores. You need to prove that you’re a responsible borrower to potential lenders. When you pay off your credit card, that might seem like a good thing.
In fact, you should use your card a little every month – even if you don’t need to – and pay it off in full. This shows you’re responsible with credit available to you and not a risky borrower.
Closed card equals higher percentage used
More importantly, closing your card reduces the amount of credit available to you. This changes your credit usage percentage, and that is what lenders look at.
For example, if you have £4000 credit available to you across two cards and a £1,000 debt on each, and then close one, you then only have £2,000 credit available.
You are now using £1,000 of a £2,000 total available credit, or a 50% usage, instead of £1,000 of £4,000 available credit (25% usage) if you keep both cards open.
Keep cards open to build your credit score by spending within 10-20% of your total available credit each month, and paying off in full.
Check the Electoral Register
You need to be on the Electoral Register to vote in local and national elections. More importantly, this is what lenders look at for two reasons. First, it establishes a verified identity.
Second, it shows how frequently you move house – people who move often are considered riskier to lend to, so have lower credit scores.
You don’t need to be on the public register, but being on the private register will help – and the longer you stay at one address, the better it is for your credit score.
Use your rent to raise your credit ccore
You can now use apps like the Emma app to use your rent payments to report regular responsible financial management to credit reference agencies.
Your rent is likely your highest outgoing every month, and until recently this was difficult to get credit agencies to take into account.
Reporting your rent payments shows that you can manage large sums every month – and that makes it much easier to raise your credit score when you’re trying to buy your first home.
A mortgage is often the same (or even less than) a monthly rent payment, and a track record of not missing any rent payments builds a strong picture for credit agencies.
Check your credit report
There are three credit reference agencies: Experian, TransUnion, and Equifax. It’s free to sign up and check your credit report on all three, and it’s important to check all of them.
That’s because they might all hold slightly different information on you, and one may have an error the other doesn’t.
Lenders don’t all use the same credit reference agency, so keeping an eye on all three reports makes sure you can spot potential issues fast.
Look for registered addressees you don’t recognise, names linked to your report that shouldn’t be there, and any accounts in your name that you haven’t created.
Report or query errors to the agency through their system to tackle mistakes and make sure you haven’t been a victim of fraud.
Apply for more credit
This flies in the face of logic, but when you are steadily building your credit score it can be one of the fastest ways to build your credit.
Just as keeping a credit card open to you when it’s paid off gives you a chance to use a lower credit percentage, so does applying for more credit.
Consider opening a new credit card or applying for a small overdraft on your bank account once a year, if you are not in debt and you are steadily building your financial situation.
This increases your available total credit, reducing your usage percentage, and as you are not in debt you are unlikely to need the credit available to you, either. It’s a strange thing, but the less you actually need credit, the more likely it is you can get it!
Or don’t apply for anything
Conversely, if you have been rejected for any form of credit in the last six months for whatever reason, avoid applying for another one. It doesn’t matter if this was a mobile phone contract or a mortgage, the impact is the same: a rejection will lower your credit score.
Soft searches on your credit report, such as those done to verify your identity when applying for a stocks and shares ISA, or pre-approval searches for credit cards, will not affect your credit score. Hard searches are when you actively apply for a line of credit after the soft search is complete – and if you are rejected, that’s what will show on your credit report.
Pay in full
While it’s tempting to only pay off the minimum or part of what you owe every month, paying your credit balances off in full after each statement is incredibly important.
One missed payment can be all it takes to damage your credit score for a long time. If you are struggling to make ends meet and pay every monthly debt off in full, consider either a balance transfer credit card or a consolidation loan.
A balance transfer card lets you shift your existing credit card debt with a 0% interest period (usually 12 months but up to three years), so that your repayments pay down the amount owed rather than mostly on the interest.
A consolidation loan means you borrow a lump sum to pay off all of your debts and then have one monthly sum that is usually a lot lower than the different debts’ minimum payments amounted to.
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