How to increase your credit score immediately: tips to boost your credit score
This post is for everyone who wants to improve their creditscorein the UK, or has moved to the UK and is looking for easy ways to improve their credit score fast.
As an immigrant in the UK, I get that it can be hard to know how to build your credit from scratch. Stick with me, my friend, I’ll lay it out for you with the friendliest language I can muster. You’ll see that it’s not as daunting as it may seem.
This is what we’ll cover:
- What is a credit score?
- What is a good credit score?
- How do I check my credit score?
- How do I build or improve my credit score?
- How long does it take to improve my credit score?
What is a credit score?
A credit score is a number between 0 and 999 that determines how good you are at repaying debt. The worse you are at this, the lower the number gets. The lower the number gets, the harder it will be for you to borrow money.
This score is determined by a number of elements that are connected to you, such as:
- Information on any credit payments you owe, and how regular/late your payments are (for example, you may be repaying a credit card, a phone plan, or a mortgage).
- A bankruptcy in your name: this is when you are so much in debt that you are unable to meet your minimum payments and dues. If you are declared bankrupt, you will need to sell all of your assets, and share the proceedings with your creditors. Yikes.
- Information about your address: to be clear, your address doesn’t affect the credit score directly, however, it does affect what information appears on your credit report. Your address is used by credit reference agencies (such as Equifax and Experian) to assemble your credit report, because an address is a common denominator across your credit accounts. They basically use your personal information, which includes your name and address, to match all your credit information to you. Also, if you have moved house a bunch of times over the past few years, some lenders may see this as you being in an unstable situation, so although it wouldn’t affect your credit, it might influence their decision on whether to lend you money.
What is a good credit score?
Like anything in life, your credit score doesn’t need to be absolutely perfect. For you to access decent interest rates or loans, you should aim for your credit score to be at least 670. Anything between 670 to 739 is considered good; from 740 to 799 it’s considered very good, and anything above 800 is considered excellent.
The higher the number is, the more a bank is likely to offer lower interest rates, and higher credit limits (aka: how much you are allowed to borrow from them).
How do I check my credit score?
In the UK, I suggest using Experian.
I think they are incredibly helpful and their website is very easy to use. You can find out your credit score for free if you create an account with them: they will ask for your personal information such as name, address, and date of birth, and they will go through a security check with some more specific questions about any line of credit you may currently have. They will then spit out your credit score number.
There is also a paid version of their service, where you can access your full credit report, including what specifically is affecting your score. I don’t think this is necessary if you just want to know what your magic number is, however, there may be good reasons to pay for more information and receive their support services.
How do I build or improve my credit score?
Excellent question my friend. You start building your credit score from the moment you start accruing credit. This means that the credit reference agencies start having information about how good you are in repaying debt, from the moment you incur such debt.
So, here is a list of everything I recommend you to do to get a great credit score:
1) Register to vote.
This is connected to the point I made before about your address being extremely important for your credit report. If you get on the electoral roll, your electoral details are recorded on your report, allowing for your personal information to be confirmed much faster and more easily by lenders.
2) Get a Credit Card and use it RESPONSIBLY.
Getting a credit card is one of the easiest ways to improve your credit, but you guys, please use it as a debit card. Don’t think of it as free money you can pay whenever, because that’s a slippery slope you risk tripping into.
If you are starting with a low credit score, you may be able to access a credit-building card, however, the interest rate on it is likely to be higher than average, and the credit limit (aka how much you can borrow) will be lower.
My suggestion would be to put some of your regular payments on your Credit Card, such as your phone bill and other utility bills you may have under your name. You will then pay for the entire balance by the due date. Did you get that? Pay for the damn thing on time.
If you don’t, not only will you accrue interest, which means that you will have to pay for a cost that wasn’t there before, but your credit score will be negatively affected the longer you keep the debt sitting there.
If you are in tight waters and are unable to pay for the debt by the following month, you have to at least try to make a payment towards it that is more than the minimum payment, and then prioritise repaying the rest of it as early as possible.
3) Don’t max out your credit card every time.
This means that if you are allowed to borrow £2,000 from your Credit Card, you should aim to borrow just a portion of it, possibly around 30% (so £600).
This is called having a low credit utilisation.
4) Pay your bills on time.
If you have set up a Direct Debit for your regular bills and utilities, make sure there is enough cash in your account for them to be able to take the money on the due date. If not, you should set reminders for when you should pay your bills, and make the transfer by the deadline.
If you pay late regularly, the credit reference agencies will know.
Often times your creditors will chase you for payment if you miss the deadline: I recommend not getting to that point if you can avoid it. Not only does it show you are unreliable if it happens often, but it will stress you out, those guys get relentless. I once got home after a holiday to three letters from EDF demanding payment, and I was only a few days late. Calm down.
5) Use LOQBOX.
Again, tragically not sponsored by them. Loqbox is a very clever company that allows you to build your credit score AND save some money at the same time. Cool, huh?
Here is how it works:
- You create an account with them, and decide how much you want to save each month from a minimum of £20.
- You proceed to make the monthly payments to Loqbox for a year. Every time you pay, Loqbox tells the credit reference agencies that you are a good debtor, making full payments on time.
- Here’s the fun part: at the end of the year, you get to have the full amount back, along with an improved credit score! How cool is that!
I should mention that you get all of your money back for free if you open a bank account (at zero cost to you) with one of their recommended banking providers. Otherwise, if you want the amount to be transferred to an existing account, it will cost you £30.
I love it. Not only does it help you with your credit, but it also encourages you to save regularly and make this a consistent habit.
If you sign up to Loqbox and use my referral code, I will get £5 which I will donate to The Wildlife Trusts: EOCVFIVOVB
6) Check your score and fix any errors.
If you have been behaving like a good boy/gal/non-binary pal and have applied all of the above, and your score still isn’t improving, this might be because of two reasons:
- There is a mistake on your credit report: this can happen if there was a fault in how the information about you was collected. If this happens, you should look into your credit report and understand what has negatively affected it, and report it to the credit reference agency. They then have 28 days to either fix it, or tell you why they disagree.
- You have been a victim of credit fraud: this is when someone impersonates you and borrows money on your behalf. I really hope this doesn’t happen to you, but if it does, I recommend referring to the Cifas website: they are a not-for-profit that support individuals who have been illegally impersonated by fraudsters.
How long does it take to improve my credit score?
This is a hard one to answer, it really depends on how good you are at all of the above. If you are good at meeting your dues and keeping your credit utilisation low, it can take as little as a few months. For others, it might take a few years to build a credit history that will award them a good score.
This is why I recommend starting to work on your credit in your twenties, even if you don’t plan on asking for a loan or mortgage any time soon: you should do your best to prove to The Man that, if you ask for some cash in the future, you will be a reliable enough to repay it back.
Related articles:
- How to save £10,000 in 8 months
- How I track my expenditure
- The best book for investing beginners
- What is Financial Independence Retire Early?
