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10 Smart Ways to Improve your Credit Score Fast!

Your credit score is a representation of your financial profile to lenders and creditors. The three-digit number informs lending agencies and financial institutions about how well you manage your finances, especially debt. With a strong credit score, the lending agency assumes that you are more likely to repay debts and loans, within the agreed time frame. Hence, you become an ideal candidate to receive credit card approvals, loans and mortgages for your home, at a better interest rate.

On the contrary, if your credit score is not on par with the agency’s requirements, you may struggle with getting a loan, credit card or mortgage approval. Even if a financial institution decides to sign off your approval, you would be required to pay a higher interest rate. As a result, it is extremely crucial for you to improve your credit score as quickly as possible. Especially considering the fact that the economy is in shambles due to the COVID-19 pandemic, you must improve your credit score to survive a potential economic recession.

What is a Credit Score?

A credit score is a three-digit number, typically ranging from 0-700 or 0-999. The number is calculated by thoroughly inspecting your credit history. The factors that influence your credit history may include the number of bank accounts you have opened, the degree of debt you are currently in, as well as the rate and timeliness at which you repay your loans. Your credits score helps the lending agencies and financial institutions conclude whether you are a viable candidate for their debt related products and whether you’d be able to repay the borrowed amount in a timely fashion. Therefore, if you have a good credit score, lenders tend to view you as a trustworthy candidate who could enjoy a credit card, overdraft facility, a loan or a mortgage.

Your credit score is determined by credit reference agencies, which goes over your spending patterns and debt repayment history. These agencies verify your identity by going through the information added on your electoral register. There are three major credit reference agencies that assess and calculate your credit score are: Experian, Equifax and TransUnion. Each agency applies its own scoring model, hence why your credit score may slightly vary, depending on the interpretation of the agency making the calculation. However, the range of the score falls more or less in the same category.

It is further important to note that your credit score cannot be applied globally. So, if you do move to another country at some point, your credit score would be re-determined by the credit reference agencies operating in that region of the world.

What’s a good Credit Score?

As there are different agencies that calculate the credit score, there are different sets of criteria that determine whether your credit score is good. For instance, if your credit score is generated by Equifax UK, it would be within the range of 0-700. This means that if your range is somewhere between 466-700, you have an excellent credit score. Similarly, a range of 420-465 denotes a good score, whereas the range of 380-419 is considered fair. However, your credit score is 280-379, you are viewed to have a poor credit score, whereas the range from 0-279 signifies that you have a very poor credit score.

On the other hand, if you look at the criteria of Experian UK, your credit score range would be somewhere between 0-999. Following this benchmark, an excellent credit score would fall in the range of 961-999, a good range would constitute a score of 881-960, whereas a fair range would be 721-880. If your credit score is poor, the range of the score would be 561-720, however, if your score is somewhere between 0-560, you have a very poor credit score.

If you wish to see your credit report, you can visit any one of the credit rating agencies. These agencies are under statutory obligation to provide you access to your credit reports, free of cost. You can either pick one agency or get a report from all pf them, just to get a clear idea. If you feel that credit score is lower than what you want it to be, you can take consider the following tips to improve it.

1. Proof of address

Your residential address is an important piece of information that impacts your credit score. Credit Rating Agencies (CRAs) need to know how often you move your principal residence.

Providing proof of your address allows lending agencies to evaluate your financial behaviour and possibility of fraud. Due to this advantage, providing your address plays an important role in improving your credit score.

Credit Rating Agencies typically get access to your personal information, such as your address, from the electoral register. The electoral register is a list of names and addresses of every individual who has registered to vote in the UK. Hence, if you register yourself on the electoral roll, the credit rating agencies can fill in the missing information that could raise your credit score.

Essentially, to enrol on to the electoral register, simply apply through your local council and they will do the rest or you can visit https://www.gov.uk/register-to-vote. Most council provide this service online and the process takes only a few minutes to complete. As the electoral register is updated almost every four weeks, the credit rating agency can update your score in a month.

2. Never miss a Debt Repayment

If you are in debt, it is extremely important to repay it on time, consistently (ideally and as soon as possible for peace of mind). The amount of debt you have is a strong determinant of your overall credit score. The more debt you have, the higher the risk of failure to repay on time, even though you are making repayments on time. Repaying your dents on time will ultimately improve your credit score as your credit utilisation is being reduced.

However, if you are unable to pay off your debt swiftly, it is important to choose a plan that requires you to make minimum payments each month. This is because if you miss out on making minimum payment required each month, over period of time your credit score would suffer drastically.

Therefore, by making minimum payments, you can ensure that you will never miss a debt repayment. As a result, the health of your credit score would not be affected.

If you have more than one ‘debt’ related product e.g. credit card, loans and mortgage, it is important to keep track of all of the money that you owe. You can create a spreadsheet that all of the debt you owe and the minimum payment required each month. Setup a direct debt so that as soon as you receive your monthly salary, your debt is automatically repaid for the minimum payment required. This will ensure that you do not miss out on any repayment.

3. Use a credit card for day to day payments to build a Credit History

If you have a credit card, saving it for emergency purposes may not be the wisest option. Using your credit card on a day to day basis can help you build a credit history. This is because when you make regular payments, your transaction history is sent to the crediting agency, where it is evaluated and considered to update your credit score. On the other hand, if you use a debit card, there would be no signs of transactions or regular payments on your credit report.

However, it is important to note that you must only spend on things that you would regularly purchase. For instance, compulsive purchase or shopping unnecessarily, for the sake of reward points, is not a great idea. It is important to make sure that you use your credit card when you are confident you can pay it off. If you are unable to pay off the amount, you could go in credit card debt, which would not only reflect negatively on your credit score but also may take you longer to repay. And remember short term lending is always expensive. The interest rates are generally very high on credit cards.

Regular credit card payments include, buying groceries, paying for streaming services, paying for fuel for your car, etc.

4. Ensure consistency in names

Sometimes, your credit score can be influenced by the fact that you have used different names in your various credit cards. For instance, if your name is Alexander Rose Goldwin, your credit cards may be titled as Alex Goldwin, Alexander Rose or Alex Rose. The inconsistencies in the names can mess up your credit report in many ways. For example, the data used to generate your credit report may be confused with someone who has the documented name of Alex Rose.

In addition to this, sometimes using different names could create confusion which may lead the credit report agency to treat the various cards as different identities. This confusion can cause your credit score to suffer.

Keeping this in mind, make sure that if you own more than one credit card, you are using the same name for all your cards.  You can use a standard pattern of writing your first name, your middle name initials and your last name. Taking the previously written name as an example, your name could be written in the following way: Alexander R. Goldwin.

When it comes to your credit cards and your credit scores, be very careful with the names. Treat your name similar to the way you would treat your NI security number, as it individually represents your identity.

5. Ask for the credit limit to be raised

Your credit card comes with a spending limit. The credit limit is the amount of money that you can leverage as debt in short term. If you smart enough, you will take advantage of the leverage (i.e. credit limit), utilise it to your advantage which could be managing cashflow during the month and pay off the balance before you start accruing interest on it.

Your credit limit can also impact your credit score. This is due to the fact that if you have a higher credit limit, your credit utilisation ratio would be low. The credit utilisation ratio is the share of available credit on your credit card. This ratio majorly contributes to your credit score.

If you have a reduced credit utilisation ratio, your credit score would ultimately be higher. To understand this, consider the following example. If you have a credit card with a limit of £5,000, and your remaining balance is £2,500, your credit utilisation ratio would be 50%. On the other hand, if you own two credit cards, each with the limit of £5,000, your credit utilisation ratio would be 25%, despite still having a balance of £2,500 on the credit card.

Therefore, in order to improve your credit score, request your bank or credit card provider to increase your credit limit. Most banks or credit card providers usually take this initiative themselves and you will be notified in the post or via email, however, you also have the option to make a request. You can do this by visiting the branch, calling them or requesting a credit limit increase online via online portal and app.

6. Get rid of any defaults, county court judgements and bankruptcies of greater than six years

The credit report also keeps track of any defaults, country court judgments (CCJ) and bankruptcies of greater than six years. This can negatively impact your reputation when you apply for a credit card, loan or a mortgage. Hence, it is essential to get them removed.

A default is mentioned on the credit report when you consistently miss repayments and break the terms of the credit agreement with the creditor. If you miss two to six payments, the lending agency may believe that you will not pay your debt and can declare a default. They can also issue a default notice against you and take the initiative to collect the debt. Your default status would be mentioned on the credit report for six years, even if your debt is paid off. This means future lenders can see your default status. However, before you are tagged with the default notice, you may get a letter informing you about the money you owe. If you pay that amount in two weeks, you can go back to your routine payments and save yourself form this stamp.

A Country Court Judgement (CCJ) is a court order that a lender can apply for against you if they feel that you will not repay the credit you owe to them. This legal notice compels you to repay any outstanding debts. If the lender initiates the legal process, you may receive a Country Court form, which you must respond to in two weeks. After responding, you can come up with a payment plan and return your dues in installments.

If you choose to avoid CCJ or do not meet the agreed terms and conditions, you seriously risk losing your possessions or may even be declared bankrupt if you are unable to repay your debts. You can either apply for bankruptcy or a lender can make the decision for you if you owe £5000 or more. CCJs can last up to 6 years on your credit report as it remains on “Register of Judgments, Orders and Fines” which is a public database. The only two ways of avoiding CCJs to be on added public register is to:

  • Repay full amount owed to the creditor within a month of issuance of CCJ
  • Prove that CCJ was issued in error

Additionally, if you are declared bankrupt, you have to follow a certain set of rules for twelve months.

If you have any of the preceding items still mentioned in the report, you can ask the credit reporting agency to remove them.

7. Do not make lots of credit applications at once (credit cards, loans and mortgage)

Your credit score is influenced by how quickly and proficiently you can pay off the loaned amount. Therefore, it is recommended that you do not apply for multiple loans and credit cards at the same time. This can backfire in a way that if a single application for credit card, loan or mortgage is rejected or not approved, it will leave a “hard search” on your credit rating because a lender has looked at your credit score and did not find you credit worth. As a result, your credit score would suffer.

In addition to this, your credit score suffers when you apply for multiple credit cards in a brief period of time with outstanding debt, as it makes you be perceived as an untrustworthy and risk-taking borrower, somebody who cannot manage their finances.

Considering this, if you apply for multiple credit card, loans and mortgage at once, your credit score can significantly take a hit. Hence, it is important to come up with a plan before you apply.

8. Make sure your utility bills are in your name (and paid on time!)

While utility bills cannot be classified as loans, not paying them on time can still damage your credit report. Making a payment after the due date, especially if the utility account is in your name, can portray you as an unreliable candidate for credit. Hence, your credit points may dip slightly. In addition to this, if your bills have been overdue for a long period of time, the utility company can forward your account to a debt collection agency. The debt collectors can forward your information to the credit report agency, thus significantly reducing your credit scores.

On the other hand, using a credit card to make the payment on time can influence the credit score positively. If your utility bills are in your name, it can reflect well on your credibility as a candidate. This will enable lending agencies to review your profile as authentic and non-fraudulent.

Additionally, any recent activity on your credit card can be used by the Credit Reporting Agency while they are updating your credit report. Be sure to keep your credit utilisation ratio low in order to improve your credit score.

9. Report any fraudulent activity (ASAP!)

If you notice that you are doing everything right, yet your credit score is still low, you must check if there are any traces of fraudulent activity being carried out with under your name. The cases of identity theft or fraud can damage your credit report and force you to go into debt. As a result, if you see any sign of fraud, it is essential to report it as soon as possible.

You can spot this by regularly checking your bank statements for inconsistencies, requesting to get an alert for every time a transaction is made with your account which is unusual to your spending pattern and by checking your credit report on a regular basis. If you observe any signs of fraud, you can call your credit card company and explain the situation. You can also report the fraud to the Action Fraud, via their website or phone.

10. Monitor progress on a monthly basis

If you have taken the initiative and started the process to improving your credit score, you must check your progress on a regular basis. This is so you can highlight the factors that are working for you, along with those that fail to provide a proper result. Subsequently, you can make the necessary changes to ensure that your credit score rises in time.  Additionally, when you see the changes in the credit score, you would feel motivated to continue the process.

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