Your credit report explained How to improve your credit rating

If you've been turned down for credit or feel concerned that your credit history could stop you getting a credit card or loan, don't despair. There are steps you can take to improve your credit rating.

As nobody has a single, universal credit rating or 'score', it's important to emphasise that this is actually a matter of cleaning up your credit report. Alternatively, it may be a process of building up a credit history if you have never borrowed before.

1. Check your credit report and correct mistakes

Remember to check your credit report at least once a year to make sure that the information it contains is correct. If there are any mistakes, these could stop you getting credit when you need it – so it's important to report them to the credit reference agencies as soon as possible.

2. Get yourself on the electoral roll

If you're not on the electoral roll, you could find it very difficult to get credit. Your local authority is likely to contact you once a year, prompting you to ensure that anyone eligible to vote in your household is on the electoral roll.

You can also register to vote online at any time through the Register to vote website.

3. Think before applying for new credit

Making an application for credit will leave a 'footprint' on your credit file, which will be visible to other lenders. If you've recently been turned down for credit, it's unwise to apply for another credit card or loan immediately; multiple applications over a short period of time may suggest to lenders that you are in financial difficulty. This could ultimately make them reluctant to let you borrow.

You can also ask lenders to perform a 'quotation search' rather than a credit search when you are looking to get new credit. If the lender agrees, this should prevent a footprint being left on your file and give you an idea of whether your application would be accepted, as well as what interest rate you'd be charged. 

Quotation searches are most frequently used for mortgage applications, particularly if you're shopping around for the best deal.

Applying for credit immediately after moving house or changing your job might affect your success rate. Lenders like to see evidence of stability, and you will be asked how long you have been at your current job and address.

If you know you need to borrow and have a big change coming up, it might make sense to apply for credit sooner rather than later.

4. Close old credit card accounts

Lenders will look not only at how much debt you are in, but at how much credit you have available, before agreeing to lend to you.

If you already have several credit cards with high limits, lenders may be reluctant to let you borrow more. This is because, if you went on a sudden spending spree, the amount of debt you are in could suddenly jump overnight – potentially leaving you at risk of failing to repay what you owe.

5. End financial associations with ex-partners

Cohabiting with or being married to someone with a bad credit rating won't affect yours – but taking out a joint financial product with them will. Opening a joint current account, for example, will create a 'financial association' between you and the other account holder. Lenders may look at their credit report as well as yours when assessing your application, as their circumstances could affect your ability to make repayment.

If you have ever jointly held a financial product with someone you no longer have a relationship with, ensure that this is reflected by asking all three credit reference agencies to add a 'notice of disassociation' to your file.

6. Build a good credit history

To improve your chances of getting credit in the future it's important to begin building a good credit history now. Showing that you can repay on time and stay within the credit limit you've been given will help convince lenders you are responsible.

If you've never borrowed money before and so have no credit history you may have limited access to loans and credit cards – especially those with the cheapest rates. You might find your only option is to borrow from your own bank, or take out a credit card with a very high interest rate. These are often marketed as 'credit builder' credit cards.

However, with APRs of up to 39.9%, credit cards like these should never be used for borrowing. Instead, users must ensure they pay off their balances in full every month in order to avoid expensive interest charges.

Choosing the right option

We believe you should take independent advice before choosing a mortgage. The Which? Group offers an independent service, Which? Mortgage Advisers, that looks at every mortgage from every available lender.

If you're looking to find out what your repayments would be at different interest rates, or want to get an idea of how much you could borrow, try using the mortgage calculators offered by Which? Mortgage Advisers.

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Which? Limited (registered in England and Wales number 00677665) is an Introducer Appointed Representative of Which? Financial Services Limited (registered in England and Wales number 07239342). Which? Financial Services Limited is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited. Registered office: 2 Marylebone Road, London NW1 4DF.