How To Improve Credit Score

Improving your credit score is a smart way to increase your chances of getting approved for various types of credit, such as loans, mortgages, credit cards, and more. A good credit score can also help you get better interest rates and terms from lenders, saving you money in the long run. However, improving your credit score is not something that happens overnight. It requires consistent and responsible financial behavior over time. Here are some tips on how to improve your credit score fast and effectively.

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Review your credit reports. Your credit score is based on the information contained in your credit reports, which are maintained by three major credit bureaus: Experian, Equifax, and TransUnion. You can get a free copy of your credit report from each bureau once every 12 months through AnnualCreditReport.com. You should check your credit reports for any errors or inaccuracies that could be hurting your score, such as incorrect personal information, accounts that don’t belong to you, or payments that were reported late or missed when they weren’t. If you find any errors, you can dispute them with the bureau that issued the report and ask them to correct them. This can boost your score by removing negative information from your record¹² ³.
Pay your bills on time. One of the most important factors that affect your credit score is your payment history, which accounts for about 35% of your score⁴. Paying your bills on time and in full every month shows lenders that you are a reliable and trustworthy borrower who can manage credit responsibly. Late or missed payments, on the other hand, can damage your score and stay on your credit report for up to seven years⁵. To avoid missing payments, you can set up automatic payments, reminders, or alerts with your bank or creditor. You can also contact your creditor if you are having trouble making a payment and ask for a hardship plan or a payment extension¹² ³.
Keep your credit utilization low. Your credit utilization is the ratio of how much you owe on your credit cards to how much credit you have available. For example, if you have a total credit limit of $10,000 and you owe $3,000 on your cards, your credit utilization is 30%. Your credit utilization affects about 30% of your score⁴, and generally, a lower percentage is better for your score. A high credit utilization indicates that you are relying too much on credit and may have trouble paying it back. To lower your credit utilization, you can pay off some of your balances, request a higher credit limit from your card issuer (but don’t use it), or use multiple cards to spread out your spending¹² ³.
Limit requests for new credit. Every time you apply for new credit, such as a loan or a credit card, the lender will perform a hard inquiry on your credit report to check your creditworthiness. A hard inquiry can lower your score by a few points and stay on your report for two years⁵. Too many hard inquiries in a short period of time can signal to lenders that you are desperate for credit or have financial problems. Therefore, you should limit the number of applications you make and only apply for credit when you really need it. However, some types of inquiries, such as those for mortgages, auto loans, or student loans, are treated as a single inquiry if they are made within a certain window of time (usually 14 to 45 days). This allows you to shop around for the best rates without hurting your score too much¹² ³.
Build a long and diverse credit history. Your credit history is the length and variety of your credit accounts over time. It affects about 15% of your score⁴, and generally, a longer and more diverse history is better for your score. A long history shows lenders that you have experience with different types of credit and can handle them well over time. A diverse history shows lenders that you can balance different kinds of debt and payments. To build a long and diverse history, you should keep your old accounts open (unless they have high fees or interest rates), use them occasionally to keep them active, and avoid opening too many new accounts at once. You should also try to have a mix of different types of credit, such as revolving (credit cards) and installment (loans)¹² ³.
Consider consolidating or settling your debt. If you have multiple debts with high interest rates or fees, such as payday loans or medical bills, you may benefit from consolidating or settling them. Consolidating means combining all your debts into one loan with a lower interest rate or monthly payment. This can help you save money on interest and fees and simplify your repayment process. Settling means negotiating with your creditors to pay less than what you owe, usually in a lump sum. This can help you get rid of your debt faster and reduce the amount of negative information on your credit report. However, both options have some drawbacks and risks, such as fees, taxes, or damage to your score. Therefore, you should weigh the pros and cons carefully and consult a reputable credit counselor or debt relief company before making a decision¹² ³.
Use Experian Boost or similar services. Experian Boost is a free service that allows you to increase your credit score by adding positive information from your bank account to your credit report. You can link your bank account to your Experian account and choose which bills or subscriptions you want to include, such as Netflix, Spotify, or council tax. Experian will then verify your payments and add them to your credit history, which may boost your score instantly. However, this service only affects your Experian score and not your scores from other bureaus. Other similar services include UltraFICO and eCredable Lift, which also use alternative data sources to enhance your credit profile.

What is a good credit score?

A good credit score is a number that indicates how likely you are to be approved for credit products, such as loans, mortgages, or credit cards. A good credit score can also help you get better interest rates and terms from lenders, saving you money in the long run. However, there is no universal definition of what constitutes a good credit score, as different credit reference agencies use different scales and criteria to calculate your score. Here are some general guidelines for what is considered a good credit score by the three main credit reference agencies in the UK:

Experian: Experian scores range from 0 to 999, and a good score is anything from 881 and above. A score of 961 or higher is considered excellent¹.
Equifax: Equifax scores range from 0 to 1000, and a good score is anything over 531. A score of 700 or higher is considered excellent².
TransUnion: TransUnion scores range from 0 to 710, and a good score is anything from 604 and above. A score of 628 or higher is considered excellent³.

Your credit score is based on the information in your credit report, which shows your financial history and behaviour.

Some of the factors that affect your credit score are:

Payment history: This is the most important factor, accounting for about 35% of your score. Paying your bills on time and in full every month shows lenders that you are reliable and trustworthy. Late or missed payments can damage your score and stay on your report for up to seven years.
Credit utilisation: This is the ratio of how much you owe on your credit cards to how much credit you have available. It affects about 30% of your score, and generally, a lower percentage is better. A high credit utilisation indicates that you are relying too much on credit and may have trouble paying it back.
Length of credit history: This is the duration and variety of your credit accounts over time. It affects about 15% of your score, and generally, a longer and more diverse history is better. A long history shows lenders that you have experience with different types of credit and can handle them well over time. A diverse history shows lenders that you can balance different kinds of debt and payments.
New credit: This is the number and frequency of your applications for new credit. It affects about 10% of your score, and generally, fewer applications are better. Every time you apply for new credit, the lender will perform a hard inquiry on your credit report, which can lower your score by a few points and stay on your report for two years. Too many hard inquiries in a short period of time can signal to lenders that you are desperate for credit or have financial problems.
Credit mix: This is the combination of different types of credit that you have, such as revolving (credit cards) and installment (loans). It affects about 10% of your score, and generally, a more balanced mix is better. Having a mix of different types of credit shows lenders that you can manage different kinds of debt and payments.

To improve your credit score, you should follow some basic tips, such as:

Review your credit reports regularly and correct any errors or inaccuracies that could be hurting your score.
Pay your bills on time and in full every month, or at least make the minimum payments if you can’t afford more.
Keep your credit utilisation low by paying off some of your balances, requesting a higher credit limit (but not using it), or using multiple cards to spread out your spending.
Limit requests for new credit and only apply for credit when you really need it. Shop around for the best rates within a short period of time to avoid multiple hard inquiries.
Build a long and diverse credit history by keeping your old accounts open (unless they have high fees or interest rates), using them occasionally to keep them active, and avoiding opening too many new accounts at once.
Consider consolidating or settling your debt if you have multiple debts with high interest rates or fees, but weigh the pros and cons carefully and consult a reputable credit counselor or debt relief company before making a decision.
Use Experian Boost or similar services to increase your credit score by adding positive information from your bank account to your credit report.

By following these tips, you can improve your credit score fast and effectively, which can help you get approved for various types of credit products with better terms and conditions.

How often should I check my credit score?

There is no definitive answer to how often you should check your credit score, as different sources may give different recommendations. However, a general rule of thumb is to check your credit score at least once a year, and more often if you are planning to apply for credit or if you suspect any errors or fraud on your credit report ¹²³.

Checking your credit score regularly can help you monitor your credit health, spot any mistakes or discrepancies, and take steps to improve or maintain your score. However, checking your score too often may not be necessary or helpful, as your score may fluctuate frequently due to various factors, such as your payment history, credit utilization, length of credit history, new credit inquiries, and credit mix²⁴.

You can check your credit score for free from various sources, such as credit reference agencies (Experian, Equifax, and TransUnion), banks, lenders, credit card issuers, or online platforms. Depending on the source, you may get a different type of score (such as FICO ® Score or VantageScore ®) and a different frequency of updates (such as monthly or quarterly). You should also check your credit report from each of the three credit reference agencies at least once a year, as your score is based on the information in your report. You can get a free copy of your report from each agency through AnnualCreditReport.com ³.

Remember that checking your own credit score will never hurt your score, as it is considered a soft inquiry. However, applying for new credit will result in a hard inquiry, which can lower your score by a few points and stay on your report for two years⁵. Therefore, you should limit the number of applications you make and only apply for credit when you really need it.

How can I protect my credit score from fraud or identity theft?

Fraud or identity theft can harm your credit score by adding negative information to your credit report, such as late payments, defaults, or inquiries that you did not authorize.

To protect your credit score from fraud or identity theft, you should take the following steps:

Check all your financial accounts for errors or suspicious activity. You should review your bank statements, credit card statements, and other financial documents regularly and report any transactions that you do not recognize or authorize. You can also sign up for alerts or notifications from your bank or credit card issuer to inform you of any unusual activity on your accounts.
Enroll in a credit monitoring service. A credit monitoring service can help you keep track of your credit score and credit report and alert you of any changes or potential fraud. You can get free credit monitoring from various sources, such as Credit Karma¹ , Experian ² , or MoneySavingExpert³. You can also pay for more comprehensive services that offer additional features, such as identity theft insurance, dark web monitoring, or fraud resolution assistance.
Place a fraud alert on your credit reports. A fraud alert is a notice that tells lenders and creditors that you may be a victim of fraud or identity theft and that they should verify your identity before extending credit to you. A fraud alert can make it harder for fraudsters to open new accounts in your name. You can place a free fraud alert on your credit reports by contacting one of the three major credit bureaus: Experian ⁴ , Equifax ⁵ , or TransUnion ¹. The bureau you contact will notify the other two, and the alert will last for one year. You can renew it if needed.
Consider freezing your credit. A credit freeze is a more drastic measure that blocks access to your credit reports by anyone except yourself and certain entities, such as existing creditors, government agencies, or employers. A credit freeze can prevent fraudsters from opening new accounts in your name, but it can also prevent you from applying for new credit yourself. You can freeze your credit for free by contacting each of the three major credit bureaus individually. You will need to provide personal information and a PIN to place and lift the freeze.
Alert the authorities. If you suspect or confirm that you are a victim of fraud or identity theft, you should report it to the relevant authorities as soon as possible. You can file a report with the Federal Trade Commission (FTC) online at [IdentityTheft.gov] or by calling 1-877-ID-THEFT (1-877-438-4338). The FTC will provide you with a recovery plan and a personal identity theft report that you can use to prove your case to creditors and law enforcement agencies. You can also file a police report with your local police department and keep a copy for your records.
Contact your creditors and financial institutions. You should also inform your creditors and financial institutions of any fraudulent activity on your accounts and ask them to close or freeze them. You may need to provide them with copies of your identity theft report and other documents to prove your identity and dispute any fraudulent charges or debts. You may also need to open new accounts with new passwords and PINs.
Notify appropriate state and federal agencies. Depending on the type and extent of fraud or identity theft, you may need to notify other state and federal agencies that may be affected by it. For example, if your Social Security number was compromised, you should contact the Social Security Administration at 1-800-269-0271. If your passport was stolen, you should contact the U.S. Department of State at 1-877-487-2778. If your driver’s license was used fraudulently, you should contact your state’s Department of Motor Vehicles.
Change your passwords. Finally, you should change the passwords for all your online accounts, especially those related to your finances, email, social media, and shopping. You should use strong passwords that are long, complex, unique, and hard to guess. You should also avoid using the same password for multiple accounts or sharing them with anyone else.

By following these steps, you can protect your credit score from fraud or identity theft and minimize the damage they can cause to your financial health and reputation.