The golden rules of credit building: What affects your credit score and how to improve it

The do’s and don’ts of credit building:

Understand what affects your credit score in a positive way

1. No more than one hard check every six months

Whether you want to take out something big like a mortgage or smaller like a phone contract, spread each application out by six months to give your score a chance to recover after every hard credit check. And if you are ever rejected when applying for credit, don’t reapply immediately — wait a few months before trying again.

Side note: Don’t panic if your score dips

It’s quite normal to see your score rise and fall. And each time you apply for a new credit account or agreement (i.e. get a new credit card or take out a loan) you’ll likely see a dip in your score until the credit reference agencies start to see you regularly paying your borrowing back. Don’t panic if this happens.

2. Always pay on time

Keeping on top of your payments is really important for maintaining a good credit score because this shows up on your credit history. Just one missed payment will stick around on your report for six years (no thank you, right?).

If that’s happened to you though — don’t worry. The more time that passes, the less important it becomes to new credit applications. So you can put your best foot forward from here on out.

3. Spend less than 25% of your credit limit 

When you spend only a small amount of your credit limit, it shows that you’re not too reliant on credit and shows lenders that you are a ‘lower risk’ to lend money to. It’s called low credit utilisation  (a.k.a. every lender's dream).

4. Don’t close your oldest credit account

A long credit history that shows you’ve used credit responsibly in the past is great for your credit score. So if you’re thinking of cutting up some credit cards or ending a credit agreement, choose a newer one to avoid shortening your overall credit history.

5. Build up your credit history over a long period of time

Your credit history has a big impact on your score, so get into the mindset of knowing you need to build a long-term list of evidence to prove you pay back what you borrow on time, every time.

There isn’t a quick fix for this, it does take time and patience. But being mindful of your money is half the battle, persevere and you’ll start to see great results — you’ve got this!

The next essential steps to improve your credit score

Now you have this list of what can affect your credit score. But there’s still more action you can take to positively impact your score. Here’s what to do next:

6. ‍Fix any errors on all three of your credit reports

Check each of your credit reports with Experian, Equifax and TransUnion thoroughly (here’s how to do that) and contact them if anything is inaccurate.

Every detail matters, so you’ll want even minor errors on your address history amended and exactly the same across all three. Don’t feel shy about bugging these credit reference agencies until it’s all perfect.

7.  Register to vote

In terms of improving your credit score, it doesn’t matter if you actually vote or not. Just being registered helps Experian, Equifax and TransUnion (the three main credit reference agencies in the UK) find your current address.

If you’re unable to register, you can ask Experian, Equifax and TransUnion to add a ‘notice of correction’ to explain why. Future lenders should then take that into consideration when looking at your credit report.

8.  Pay off your debts*

*Even if this doesn’t apply to you now, you may need to borrow in the future, so be mindful of this one.

Debt is a real part of life, and paying off debts is a lot easier said than done. We totally understand, shifting your debt can feel like a mammoth task. 

But making a start to prioritising paying off your highest-interest debt first will help free up more of your money in the long run. And it’ll be a positive thing for your mental wellbeing, as well as your credit history.

Use this debt repayment planner to get started.

9.  Ask to remove old ‘financial connections’

By this, we mean your exes or old housemates that you previously held joint accounts with (including utility bills). Unfortunately, if they have a poor credit score, they could be bringing yours down too, so ask Experian, Equifax or TransUnion to remove them if you are no longer living together.

10.  Become a named bill payer

Adding yourself as a named bill payer can be a simple but effective step towards building more credit history (which in turn affects your credit score).

However, be mindful of point 9 if you’d rather not be ‘financially associated’ with the other adults you currently live with. There are other ways to start building your credit history, for example getting a mobile phone contract.

Finally, get started with Loqbox 

If you’re feeling wary about taking out a credit-building card or aren’t able to become a named billpayer, but know you need to build your credit history, Loqbox could be a good alternative — we want you to enjoy a happier, healthier relationship with money.

Whether you want to build a pot of savings, give your score a boost, or use your rent to build your credit history,  Loqbox has some brilliant credit-building tools to help you do that and take care of your financial wellbeing as you go. The best thing is it’s really easy with Loqbox, and you’re safe in the knowledge that we have your best interests in mind every step of the way. It’s quick and easy to get started: learn more about Loqbox here.

 Improvements to your credit score are not guaranteed.

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