Do you have a poor credit score?

Credit Rating Agencies such as Experian, Call Credit and Equifax who prepare credit reports show a score below 500 is considered as poor

Having a poor credit score makes it harder to borrow money and get better deals on things like credit/store cards, insurances, utilities, loans, mortgages etc Lenders are likely to see you as more of a risk, so you’ve a higher chance of being refused credit

You may also find that it is stopping you from renting privately as more landlords are getting credit reports when you make your application

But don't worry, your credit score is not set in stone and you can start to repair it.

• You build credit by making your full payments on time, if you have a history of late payments (defaults) or not making them at all this will hurt your credit score.

• Stay below your credit limit and don’t use all available credit. How much of your total available credit you owe is known as your credit utilisation. For example, if you have a £2,000 credit card limit and owe £500, your credit utilisation ratio is 25%. If you keep your credit utilisation relatively low, potential lenders will view you as managing your finances responsibly.
  

• Register to vote as it makes it easier for lenders to check your identity.
  

• Try not moving house too often – lenders like stability. If you do move house, remember to register to vote again.

• Being financially linked (referred to as having Financial Associations) to someone with bad credit can harm your credit worthiness. Examples of financial associations are joint mortgages and a joint bank account.
  

• Try to ensure you manage your overdraft. Your account goes into overdraft when your current account balance is below zero. Your arranged overdraft is when you’ve agreed with your bank a maximum amount you can owe. An unarranged overdraft is when you haven’t agreed an overdraft with your bank, but have spent more money than the amount in your account. Going into your unarranged overdraft may be reported on your credit report and can lower your score.
  

• Close old unused credit accounts. If you’ve held several credit cards over the years, you may find some of them aren’t used anymore. If that’s the case, it’s best to close those unused accounts. You'll then lower the total amount of credit available to you. A large overall credit limit, even if unused, can be seen negatively by some lenders.
  

• Check your Credit Report. Your credit report holds details on your financial history, including whether your accounts have been settled or if you have missed payments. Sometimes this information can be incorrect, so check your credit report for its accuracy. If something seems to be missing or there are errors, contact the provider to correct them. Similarly, you can add a ‘notice of correction’ which allows you to explain why a payment was missed.
  

• Get a pay monthly mobile phone. Taking out a pay monthly mobile phone contract can help improve your credit score if you manage it responsibly. Each monthly payment is a form of credit agreement, and making those payments on time shows lenders that you’re reliable with your financial commitments.
  

• Pay for car insurance monthly. Paying for car insurance monthly can help improve your credit score because it’s also treated like a credit agreement.
  

• Use an eligibility checker. Using an eligibility checker before applying for credit can significantly reduce your risk of being rejected because it performs a soft credit search that doesn’t affect your credit score. These checkers assess your chances of approval based on your credit profile and the lender’s criteria, helping you identify products you’re more likely to qualify for. If you apply for credit and a hard credit search is performed, these will leave a mark on your credit file. It’s good practice to space out credit applications to minimise any damage to your score.
  

• If you have a County Court Judgement (CCJ) against you, your credit score will be affected. To improve your credit score, you should try and clear what you owe as quickly as possible. Even though CCJs remain on your file for six years, they will be marked as settled when you pay them off. You would need to check your credit report then just to ensure it is marked correctly. If there is a mistake and you need proof of payment, you may have to apply to the court for a ‘certificate of satisfaction’. You have to pay a fee for this but doing so will improve your credit rating.

Improving a poor credit score can take a few months to over a year, depending on your financial situation and the actions you take.

If you’ve never borrowed money before, there won’t be any evidence that you’re a responsible borrower who can pay money back in good time. So, if you’ve just turned 18 or just moved to the UK, you will probably have a low credit score.

A good way to build a credit history is with a credit builder card. These cards often have higher interest rates, so make sure you pay off the balance in full each month.