It’s easy to ignore, but your credit score is an important indicator of your financial health. Ex-partners or just an incorrect address could be dragging it down, making it harder for you to get the best credit deals.
Your credit score is calculated by credit reference agencies (CRAs) using the information in your credit report. It’s designed to be a reflection of how creditworthy a CRA believes you are to potential lenders.
The three biggest CRAs in the UK are Experian, TransUnion and Equifax. Frustratingly, there’s no consistency in the credit scoring scales they use.
For example, a score of 555 with Experian would be considered ‘very poor’ (its maximum is 999) but with Equifax’s scale (measured up to 700) it would be ‘excellent’.
However, the factors that influence your score are the same, whichever version you’re looking at. Here, Which? explains the simple steps you can take to boost your credit score and have a richer 2020.
1. Register to vote
Being on the electoral register makes it easier for lenders to confirm your name and address.
Experian says that this will help to boost your credit score by 50 points.
You can add yourself to the electoral register in just five minutes by going to Gov.uk.
2. Correct errors on your credit report
We surveyed 1,105 members of the public in 2019 and found that nearly four in 10 have never checked their credit report.
Of those who had checked their report, more than a fifth said they had found an error.
A credit report error could be an old address, a wrongly recorded missed payment or even a credit product fraudulently taken out in your name.
If you find information in your report that you disagree with, you can take this up directly with the lender in question or alert the CRA, which will contact the lender on your behalf.
The CRA has up to 28 days to deal with the dispute and confirm what action it will be taking.
- Find out more: how to check your credit report for free
3. Make your rental payments count
While tenants pay thousands of pounds in rent each year, this information isn’t recorded on their credit reports, so doesn’t have any impact on their credit scores.
This can mean that many renters struggle to prove that they could pay a mortgage, even though they are making similar or more expensive payments already.
Rent reporting tools are being developed to help would-be homeowners boost their score.
The Rental Exchange allows private renters and social tenants to pay their rent via the platform which then pays it to landlords. However, it relies on landlords being signed up to the scheme.
For now, all these platforms allow you to track rental payments and report payments on your Experian credit report, so if a lender uses TransUnion or Equifax it won’t be able to see this record of good behaviour.
Experian says that it will update credit scores once it gets feedback on how lenders are using the rental payment information in their assessments.
It estimates that 79% of tenants will see a noticeable improvement in their credit score if lenders were to take the rental data into account.
- Find out more: how to improve your mortgage chances
4. Use a credit-builder card
One way to combat a poor score or a non-existent one is to use a credit-builder credit card.
These deals tend to have lower limits, higher interest rates and fewer benefits than mainstream credit cards, but if used sensibly they can boost your score.
In our annual credit card customer survey, seven in 10 told us that they had seen an improvement in their credit score since taking out a credit-builder card.
- Find out more: use Which? Money Compare to shop for credit-builder cards
5. Close unused or unwanted credit cards
Research from Credit Karma, a platform offering access to TransUnion credit reports, suggest nearly 40 million credit cards are lying unused in the UK.
If you have an unused card, it could leave you vulnerable to identity theft and in some cases even affect your credit score.
By not regularly checking up on these cards fraudsters could run up credit card debts in your name and fail to pay them off – negatively impacting your score with a missed payment.
Some lenders may also view thousands of pounds of unused credit negatively – as it has the potential to be used, so you could be rejected for other lines of credit you might need like a mortgage.
6. Keep your credit card usage down
CRAs will take into account your ‘credit utilisation’. This is a measure of how much credit you are using versus how much credit is available to you.
If you had £8,000 available across three credit cards, for example, and in total had a balance of £7,000 outstanding, your credit utilisation would be 88%.
Experian says that keeping credit utilisation under 30% or at least not over 90% will help your score.
Bear in mind that closing credit accounts (as mentioned above) can affect your ‘credit utilisation’, increasing the percentage of available credit you’re using. This can make you look too reliant on credit – so it’s worth weighing up the two factors before taking any action.
- Find out more: credit scoring: are you in the dark?
7. Close joint products with exes properly
Living with or being married to someone who has a bad credit rating won’t affect yours, but taking out a joint financial product will.
Opening a joint current account with an overdraft, for example, will create a ‘financial association’ with the other account holder.
Sometimes closing down the account is not enough to wipe the slate clean as the association might remain on your credit report.
If you have ever held a financial product with someone you no longer have a relationship with, ask all three CRAs to break this link so that your ex-partner’s financial situation doesn’t have any impact on credit applications you make in the future.
- Find out more: how to improve your credit score