The cost of living is going to be front of mind for most of us as we settle into 2023. Not only are day-to-day essentials getting more expensive, but rising interest rates are making borrowing even more difficult. If you’ve encountered some drawbacks and need to rebuild your credit score, Loqbox’s guide helps you get your credit score back on track.
Why should I rebuild my credit score?
So, why rebuild your credit score in 2023? Your credit score is given to you by the top three credit reference agencies (CRAs) in the UK: Experian, Equifax and TransUnion. It’s calculated from your credit report, which records how you’ve managed your debts. Lenders check your credit report to decide if they will lend you money and at what interest rates. Read more about credit scores here.
As 2023 is going to be a tough year for lots of us, and with interest rates going up so much, getting the best deals you can from your financial products is going to be more important than ever when you’re balancing the books. In fact, paying less interest could literally save you thousands in the long run!
How long does it take to rebuild credit?
Rebuilding your credit takes effort and patience. But it is well worth it! Fortunately, Loqbox has some great tips to point you in the right direction, as well as some proven ways to build your credit score quickly. But how long does it normally take for your credit score to go from zero to hero?
When you make changes to your credit report it can take up to three weeks for them to show. After that, it can take anywhere between three to six months for those changes to start pushing your credit score up.
But remember, missed payments, defaults, and CCJs can stain your credit score for six years so you have to be super careful! It can also take six years to rebuild your credit score after bankruptcy.
12 tips for how to rebuild your credit score in 2023
OK, so now you know why you should rebuild your credit score this year. Now it’s time to look at how! You don’t have to do everything on this list to see improvement but the more you can get through, the better chance you’ll have of improving your credit score. Let’s get into it!
1. Set up automatic payments and reminders
This is just a great habit to get into, and it only takes a little bit of setting up. Make sure all your essential regular payments (bills, credit cards, rent or mortgage) are set up as Direct Debits or standing orders so they come out of your account automatically. If you can’t set up a standing order or Direct Debit for any reason, at least get some reminders on your phone to reduce your chance of missing payments.
Making all of those payments on time, and in full, will do wonders for your credit score over time. Also, set up your Direct Debits, standing orders, or reminders to shift money on payday so you’re not tempted to spend it on anything else. It also helps you live within your means which is great for budgeting (more on that below).
2. Make credit cards work for you
It may seem counterintuitive if you’ve had some missed payment issues, but a great way to rebuild your credit score is to actually use credit.
One way to do this is by taking out a credit-building credit card. These will come with very high-interest rates. But if you use it properly and make your minimum payments, your regular and responsible credit card use will rebuild your score.
Finally, if you already have an old credit card with a good payment history, don’t get rid of it. While it might be gathering dust at home, it might also be polishing up your credit score with the credit reference agencies (Experian, Equifax and TransUnion).
As a guideline, lenders like you to be using between 1%-25% of your total available credit, across all lines of credit. So the more available credit you have unused the better. Old credit cards can increase your total available credit - and therefore how much money you can use - without affecting your score.
3. Get started with Loqbox Spend
If you don’t have a credit card, or you’re not sure that it’s the right option for you, you can get started with Loqbox Spend instead.
You can boost your credit score just by spending £2.50 per week on a Loqbox membership, and with Loqbox Spend activated, we’ll report those payments to Experian, Equifax and TransUnion to boost your score.
It takes two minutes to set up and you could see an improvement of 125 points to your credit score in the first six months, on average*. It’s as simple as that!
4. Pay off your debts
This is definitely easier said than done, but it’s a really important step towards growing your credit score. If you can, you should pay off all of your debts as soon as possible. Making regular payments and chipping away at your debts can help to balance out and build on your credit score.
There are a couple of ways that you can approach your debts. The ‘snowball method’ clears your smallest debts first, so you can build confidence and motivation to tackle your bigger ones. The ‘avalanche method’ takes on your highest interest debt first to give you the financial freedom to mop up your smaller ones.
If you aren’t in a position to tackle your debts in 2023, it’s important to at least be making all of your minimum payments for your credit cards or loans. Missed payments are bad news for your credit score because they stay on your record for six years.
5. Plan out a budget
A budget is a great way to look at your finances and see where you should be making some changes to start rebuilding credit. It’s also much easier than you might think! With the 50/20/30 rule, you simply break down your post-tax income into manageable chunks. 50% for what you need, 30% for what you want, and 20% to pay off your debts or fill your savings.
There are lots of ways to make a budget and you can find the budgeting rule that’s right for you here. But if you make a commitment to put a percentage of your income towards building your credit score, with some patience you will soon start to see the rewards.
6. Get started with Loqbox Save!
If you’re in a position to put at least £20 per month aside (£240 per year), with Loqbox Save we loan you the annual total and lock it away so that you can make your monthly payments.
We report your regular savings payments to the CRAs so they can record your responsible activity. After 12 months, the loan is paid, you’ve got access to the money you saved and your credit score should have gone up, provided you’ve also been responsible with your other lines of credit. Smart, huh?
7. Register on the electoral roll
A really quick and simple way to give your credit score a boost is to get on the electoral roll. The electoral roll is a register of everybody who is eligible to vote in the UK. Lenders will use it to check your identity and your address.
If you aren’t already on the electoral roll, do it now! It will give your credit score a boost just by being listed — if you’re eligible, you can register here.
8. Apply for credit (but not too much!)
Of course, the best way to rebuild credit is to use credit responsibly. Getting a credit card or loan (or Loqbox) can really help to build your credit history. But you have to make sure you’re financially ready to take on any new debts before you jump in, because it is also a quick way to damage your credit score if you don’t use them properly.
A great way to make it work is to get a line of credit (e.g. a credit card or loan) and use it to pay regular payments like bills. Then set up a Direct Debit to pay off the credit card. It’s the same as just paying them straight from your bank to your provider, but by going via your credit card you will be showing regular responsible activity and helping to rebuild your credit score.
But be careful not to apply for too much credit in a short period (the general rule is one application over six months). When your credit history shows lots of credit applications over a short space of time, that will actually decrease your credit score. So if you’re declined for one credit card don’t immediately jump into another one. You can get a Loqbox membership without any hard credit checks - find out more here.
9. Check your credit score
OK, checking your credit score won’t increase it on its own. But it might help you spot any mistakes or issues that could be dragging your credit score down, like a typo on one of your addresses. You can find out more about how to correct errors on your credit report here.
Remember, you have three credit scores across three different CRAs: Experian, Equifax and TransUnion. A mistake could be showing on one CRA’s credit report, but not on the others so really you need to keep an eye on all three. It’s especially good for keeping a careful watch for fraudulent financial activity in your name.
The good news is that you can check your credit score with each CRA for free and without hurting it using these recommended services:
ClearScore (uses Equifax data)*
Credit Club (uses Experian data)
Credit Karma (uses TransUnion data)
*If you sign up for ClearScore using this link, they’ll thank us with a little commission.
10. Get started with Loqbox Rent
So here’s another clever and proven way to build your credit score. With Loqbox Rent you can connect your bank account, tell us how much your rent payments are and when they go out, and we do the rest!
We report the regular rent payments to Experian to build your credit history over time. After all, you’re paying rent every month, so shouldn’t it count towards your credit history? We think so.
So no matter if you pay rent to a landlord, letting agency, local council, family member or friend, you can use Loqbox Rent. It’s included in your £2.50 a week Loqbox membership, so you can easily get started here.
11. Watch out for scammers
Being a victim of a scam can lose you money but it can also affect your credit score. If your credit card details are stolen and criminals spend on it, that debt is linked to you. Of course, it’s a good idea to avoid scams anyway.
If you receive social DMs, texts or emails from companies or people you don’t know, asking for you to click links or sign into accounts, the chances are it’s something phishy!
In fact, even if you’re a customer of a certain company and you receive an email asking for personal details that seems like it’s from them, the best thing to do is delete the message and contact the company through their official routes.
12. Add your name to the bills
Getting your name on utility bills means there’s a record of your payments. If you’re paying towards bills on time and in full, you want to make sure that you get the credit - and the credit history! If you can, it’s good to avoid landlords who offer all-inclusive rent with bills, as you won’t benefit from those utility payments even though you’re making them.
It’s also worth keeping in mind that anybody you share the utility bills with might be linked to your credit report. If they have a bad credit history then that might reflect badly on you and you may be considered a risk in the future.
Rebuilding credit takes time
Following these steps will help you put your best foot forward when it comes to rebuilding your credit. Although, we do understand that it can be frustrating to feel like you don’t have the credit score that you deserve – with time and effort you can rebuild it – and in the meantime, just remember that your score isn’t a reflection of who you are as a person.
If you’re needing to rebuild your credit because you haven’t used credit for a few years or you’re new to the UK credit system, this will be quicker to achieve.
But if you’re rebuilding your score due to something like a missed payment, a default, CCJ, or bankruptcy, you will have to wait six years to clear this from your report and have a fresh start. However, the good news is that the more time that passes, the less these things will matter to lenders.
You can start rebuilding healthy credit history from today by using Loqbox. If you can spare £2.50 a week towards a membership, you can use all our brilliant credit-building tools at the same time leading to the quickest way to rebuild your credit.
Be mindful that this is a long game, but by showing responsible behaviour (such as paying your credit agreements on time, every time), you’ll have the best opportunity to hit reset. We’re with you every step of the way — you’ve got this!
*Improvements to your credit score are not guaranteed.
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