How to improve your credit score

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"Buying my first house with no deposit by taking out a £15k loan the same day my mortgage got accepted was not one of my better financial decisions"
How to improve your credit score

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How to improve your credit score
I was having a discussion on a group yesterday about how to improve your credit score (yes exciting I know 🥱). But it’s the one thing nobody thinks about until they need it, which is normally the time they are applying for a mortgage or a loan by which time it is too late as it can take MONTHS to improve!
 
From the conversations we had it seems I know quite a bit about credit, because up until last year I’ve been heavily in debt most of my working life (as most people tend to live these days), buying cars, gadgets, phones and furniture I couldn’t afford on credit.
 

Mistakes, I’ve Made a Few

 
Buying my first house with no deposit, by taking out a £15k loan the same day my mortgage got accepted was not one of my better financial decisions. Then furnishing the whole house with a credit card too . . . BRILLIANT!!  I would definitely not advise anyone else to do this as it is literally mortgage fraud! This means I was in well over my head, and in mountains of debt for years. I was not only paying a mortgage and the usual house bills every month but also the deposit, sofa, bed, wardrobe, washing machine etc etc. So I thought I would share what I have learnt since then about building up your credit score the RIGHT way, incase it can help someone else that is looking to get a loan/mortgage or just wants to start improving their score now for when they will need to use it later.
 
There are 3 main credit reference agencies in the UK: Experian, Equifax and Transunion. There is another lessor known one Crediva but the first 3 are the main ones used by banks etc. They all have their own secret methods of coming up with a score that literally nobody else knows.

Check My File

How do I improve my Credit score?

The best way to get access to all 4 of these reports together in one place is via: https://www.checkmyfile.com/. You can view your credit file from all 4 agencies and it gives you an overall score based on all 4 reports. It gives you basic information on how to improve your credit score but I didn’t find it very useful, it’s just generic information that is common knowledge. They are good however if you want to view and remove any financial connections from all 4 reports. With just 1 click of a button they email all 4 agencies and tell them all to remove the association from your credit file. It is free for the first 30 days (you have to enter your card details though so you will get auto-enrolled if you forget) but after that it is £14.99 per month, this is the same price as Experian but obviously gives you a much better overview of your actual score as it’s an average of all 4.

Experian

You can access your Experian score directly through them at: https://www.experian.co.uk/. I find their score is always much higher than everywhere else so it’s not necessarily a very good representation of where your credit actually is overall. It’s great if the lender you are going with uses them as I know a lot of people that have a 999 out of 999 score but if your lender uses a different agency it’s likely to be a much lower score. You can view your score for free but to view anything else and any recommendations for improvement it is £14.99 per month to join their Credit ‘expert’ service.

Equifax

Tips for improving my credit score

You can access your Equifax score through: https://www.clearscore.com/ and you’ll be glad to know this one is completely free. They must make money as a kick back for recommending you loans and credit cards. I think the other 2 above do too but they must just be greedy and want the monthly fee AND the kick back! I found this site to be pretty good but aside from the standard ‘pay your bills on time’ and ‘don’t apply for credit too often’ there wasn’t really any actionable steps on there that I could take for improvement (or on any of the 3 I’ve mentioned above to be honest).

Transunion

 

You can access your Transunion credit file through: https://www.creditkarma.co.uk/. This is also a completely free service and is BY FAR the best service for actually showing you how to improve your credit score. They give you simple, actionable steps you can take today and it’s not just the standard wishy washy generic advice. I only joined 3 months ago and have already improved my score by 16 points since March. They tell you the main points that most of us already know but they also give you random tips you would never realise or work out on your own which I will share with you below from my own report. I found that by doing all the common things like paying bills on time, paying off all my credit cards in full etc I had a good credit score but once it plateaued I couldn’t seem to get it any higher until now.

 
So how do the credit scores compare?
 
From my own results:
Experian: 999/999 = 100% (I told you they over score haha).
Credit Karma: 639/710 = 90%
Check My File: 839/1000 = 83.9%
Clear Score: 531/700 = 75.9%
 
So as you can see 75% – 100% is quite a huge range of scores. If your exam or course work was marked by 4 different examiners and it came back ranging from 75% – 100% you wouldn’t be very impressed would you? But somehow these credit reference agencies get away with it. I can’t understand why there isn’t just one credit reference agency with one generic score that is used by every lender, this current system just doesn’t seem fair at all does it?
 

How To Improve Your Credit Score

How do I improve my Credit Score?

Obvious

 
Pay all your bills on time.
 
Make sure you are on the electoral register at your current address (the longer you are registered at the same address the better).
 
Make sure you are only registered at one home address (the longer you are registered at an address the better).
 
Don’t carry out hard credit searches very often (hard searches are for credit such as mortgages, credit cards, loans, opening bank accounts, car finance, phone contracts etc).
 
Don’t open up new bank accounts too often, try to leave at least 6 months between new accounts.
 

Less Obvious

Financial Connections

Every time you take out credit with someone else they become linked to you on your credit report for ever more (until you remove it I have found). So old partners, people you were on a mortgage with, opened a bank account with or took a phone contract out for etc could all be dragging your score down, so as soon as the financial link between you has been removed it is best to remove them from your credit file. It’s important to note though, similar to car insurance, the other person could also be improving your score so if it is a parent who is very good with money that’s still on there it might be better to leave them on there (check my file actually shows you the effect the person is having on your file).
 

Oldest Bank Account

Keep at least one bank account for a long time (so don’t close or move your oldest bank account, for £100 it’s not worth it. If you want a switching bonus, switch a newer account and keep your oldest one where it is).
 

Available Credit

 
The more credit you have available to you (unused) the better your score will be. So someone with a 20k limit on their credit card will get more points than someone with a 1k limit. View your credit limit as a sign of built up trust and rapport with lenders and not something negative or to be avoided. Credit Karma have told me that if I up my combined credit card limit to £15k rather than £13,700 I will see an improvement.
 

Use 1%-25% Of Your Available Credit

 
Now this is an odd one because I thought I was actually doing good by not using ANY of my credit. Credit Karma have told me to use between 1%-25% of my combined credit limit rather than 0% so instead of paying my card off entirely like I normally would I’ve left 1% on this month. I guess it shows you can use and manage the credit rather than just avoiding it altogether.
 

Where To Start If You Don't Have Any Credit At All?

 

It can be hard when starting out with a completely blank slate. As I mentioned at the start most people don’t even think about their credit score until they want to get a new car on finance or buy their first home but by then it’s way too late. You need to start building this score up slowly as soon as you are 18 and able to take out credit. 

At the start it can be hard just to get ANY credit at all. It’s a bit of a vicious cycle . . . . you can’t get any credit because you don’t have a credit score, but the only way to build a credit score is by having credit . . . . which you can’t get (confused yet? haha).

Phone Contract

So where do you start? You need to start off really small. A phone contract is normally the best place to start, and that doesn’t mean a £10,000 Iphone XX5000 (or whatever model we are on by the time you are reading this). Just get an average £2-£300 cheap phone on a £20 a month deal. Or even just a sim only contract for your current mobile is a better option but make sure it is a proper 12 month or 2 year contract paid by direct debit and not a rolling monthly sim with no contract that you automatically pay for by card.

Credit Card

Or a £500-£1000 credit card but make sure you pay it off IN FULL every month. Please don’t go buying loads of new clothes or rubbish you don’t need and justify it by saying “I need to buy all this rubbish to build up my credit score” no you don’t. Just buy the same things you normally would like food, petrol and everyday essentials but just buy them on a credit card instead of a debit card. You will struggle to get your first credit card so don’t apply for loads of them as it negatively affects your score each time you search even if you are successful. You can apply for a ‘credit builder’ card here: 

https://www.moneysupermarket.com/credit-cards/credit-builder/

They have high interest rates because they are for people with no/bad credit but you are not paying ANY interest remember because you will be paying it off IN FULL every month . . . . please!!!

Household Bills

Get your name onto some of the household bills. Ask your parents if you can pay the Sky tv, broadband or electric in your name and they just transfer you the money. Beware with this option though as they may use this to finally get you to start paying towards living costs haha!

Make Sure You Are On The Electoral Roll

This simply means registering to vote. Make sure you do this at your current address, and be sure to move this whenever you move house. You can register to vote here: 

https://www.gov.uk/register-to-vote/

 

Any other tips I have missed? Comment below, what has been your worst financial decision? Haha come on don’t be shy!! I’ve just shared my entire credit report from all 3 agencies with the whole world 🤷‍♂️ 😂..

Disclaimer

Nothing in this blog should be considered financial advice. The author is not a financial adviser and has no training in this field. He is just sharing information and ideas he has either formed himself through his own experience or that he has read from other sources. Please do your own research before making ANY investment or financial decision. Taking out credit without a sound financial plan is a slippery slope and can lead to a mountain of debt . . . . believe me I know! Money and finances are one of the leading causes of depression and divorce, please treat your finances with the respect they deserve. The author and this blog/website accept no responsibility for any financial loss or hardship as a result of blindly following any of the information contained within.

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