15 Tips for improving your credit score

If you have been denied credit, a mobile phone
contract or an application for a bank account it is normally due to having a
particularly low credit score. Repairing a credit score is a long term process
but is undoubtably worth the hassle as it can make financial transactions less
painful and future borrowing less expensive.

Here are some tips that will help you get started.

1. Review your credit report and check for errors.
More often than not there are one or two mistakes that can be corrected
provided you have the supporting documents. By bringing up these issues with
the credit report company and going through the investigation process to get
them removed you can rapidly improve your credit score

2. Ensure your personal details are correct. Making
sure your address and contact information are up to date as well other details
such as your marital status and employment is vital to maintaining a good
credit score. Most importantly ensure you are registered to vote at your
current address - credit reference agencies will check the details you provide
against the electoral roll and if you are not on it you will severely affect
your ability to get credit

3. If you are refused for credit do not look
elsewhere - first check your credit report, fix any errors and work to
improve your credit score. Each application denial is recorded on your report
and many applications in a short space of time - or worse still a succession
of denials - count against you. If you have already made multiple unsuccessful
applications then you will need to wait six to nine months before applying
again so they do not prejudice your application - and in the meantime you
should continue to work to improve your credit score.

1. If you have more than one credit card or loan
   always make sure you pay off the one with the highest interest rate first
   (while ensuring you meet minimum payments on the others). Once you have paid
   off the card with the highest interest rate close the account and move onto
   the next
   
2. Wherever possible try to move your debt from
   high interest accounts to lower interest - for example an overdraft can often
   charge as much as double the interest of a credit card, and a 'reward' or
   'affinity' card will often charge a much higher level of interest than a
   standard, no frills credit card.
   
   3. Avoid store cards at all costs - they charge
   punitive levels of interest. If you have store cards and are unable to repay
   them immediately, at least try to shift the debt to other cheaper forms of
   borrowing
   
3. Stop Saving - although saving should certainly
   be encouraged when your debts are managemable, recent rate cuts make it highly
   unlikely you will earn more in interest from savings than you will pay on your
   credit card debts - use a savings
   calculator to check. Using your savings
   to clear your highest interest rate borrowing is a wise financial move while
   will enable you to save more in the longer term. Check for forgotten accounts
   such as inheritance given when you were a child as these can be a fast way of
   clearing your debts and moving to financial freedom
   
4. It is too easy to use your credit card to pay
   for everything. To cut down on your credit card debts you need to break this
   habit - try not to spend anything on your credit card if you can, or limit
   yourself to food shopping and other essentials. If you're not heading to the
   supermarket, leave your credit card at home!
   
5. To ensure you have more money to meet your
   repayments you should stop spending money on things that you don’t really
   need. These include gadgets, clothes, drinking, eating out, shiny shoes and
   cinema tickets. You may miss them for at first but it need only be a temporary
   measure; when your finances improve you can enjoy them again.. in moderation!
   
6. Always meet your minimum repayments - there is
   no sense in paying off one card while incurring charges on another for missed
   payments. Your bank can help you set up a direct debit to simplify this
   process
   
7. Look for ways to enjoy staying in instead of
   going out. Inviting friends over for dinner can be a great way to save money
   on eating out or going to the pub, and watching a DVD or playing a board game
   with your loved one(s) will always work out cheaper than a trip to the cinema.
   Buy a good cookbook and cut down on takeaways. Sexy underwear and candles can
   also make for a great night in!
   
8. Check your bank statements for any monthly
   payments you make for non-essential services as these will seriously affect
   your ability to repay your debts. Often we sign up for frivolous services such
   as monthly DVD rentals or cable TV we rarely use - closing your account for
   these services can free up significant extra cash to help you meet your
   repayments. If you think a service is essential - your mobile phone contract,
   for instance - then try to renegotiate your contract onto a cheaper monthly
   plan, and opt to text friends and families rather than call them to save more.
   
9. To come up with the extra money you need to
   repay your outstanding debts try working overtime, getting a second job if it
   is possible and sell stuff that you don’t need.
   
10. Speak to your creditors and explain your
    financial situation and how you plan to remedy it - often the fact you are
    showing willing will lead to assistance and advice in meeting your repayments
    
11. As things improve, close your unused accounts
    especially the newer ones. You can also apply for a new credit cards offering
    lower interest rates than your current ones. Where possible opt for cards with
    a low or zero balance transfer rate (be wary of transfer fees - these can
    often significantly reduce the benefit) for an 'interest rate holiday' to
    increase the speed you can pay off the debt and endeavour to pay off the new
    cards as soon as possible

Improving your credit score is vital if you score
is below 700. Doing so will enable you to demand better rates from banks and
other lending institutions when you want to buy a house, a car or undergo
renovations at home.

Although it may take some small sacrifices to
improve your credit rating it is certainly worth the effort. With a bit of
practice these steps will become natural - it is certainly possible to live very
happily while living frugally, it just takes a bit of
creativity.

Improve your credit rating

A bad credit rating can limit your borrowing options. County court judgments, defaulted payments and bankruptcy orders leave a black mark against your name when trying to secure credit.

Usually, the only means of credit available in these circumstances is through what is known as the sub-prime market, where would-be borrowers are charged high rates of interest to reflect the perceived risk to the lender.

Credit agencies

Most lenders go through two main credit reference agencies for information on your financial past – Equifax (08700 100 583) and Experian (0870 241 6212). This is Money offers this service at www.thisismoney.co.uk/ creditcheck.

They compile credit histories from a number of sources, including the electoral roll, county court judgments and how effectively past debts have been paid. Every time you open a new form of credit it will leave an electronic footprint on your record. The decision to turn borrowers down for credit isn't made be Experian or Equifax but by the lenders, based on their own criteria.

Data protection

If a lender refuses you credit, it must say why. Under the Data Protection Act, if you are refused credit, and scoring was used to help the lender decide, you can ask for a review of your application.

This gives you the chance to review your rating and see where it may need improving. Alternatively, it gives you the chance to point out mistakes that may be on your record.

All is not lost if your rating is poor - although it may take time to repair. Bankruptcy details remain on people's ratings for up to six years, although it should take a year of good credit practice to return a rating to health.


Where to start

The first thing is to make sure all your payments to creditors are made on time. If you are forced to miss a payment, make sure you tell the creditor and the payment is made the following month.

Also, simple measures such as making sure you are on the electoral role or filling out credit application forms correctly will help boost your rating.

You should also buy your credit history from the ratings agencies and make everything is correct and up to date. For example, if you have paid a debt that was the subject of a county court judgment, make sure it is shown on the file.

You can do this by post for £2 or This is Money offers an online credit rating service.

If a bankruptcy order is annulled ensure a copy of the order of discharge or annulment is distributed to credit agencies.

Lenders can also search your credit report more than once during a single application and if this occurs you should again alert credit reference agencies.

Reference agencies also allow people to explain why they may have had a period of poor credit performance. Consumers can attach a 'notice of correction' on their report explaining why they missed payments.

What does my credit score tell me?

Your basic credit score tells you very little and is pretty useless. It will be a number that indicates whether you are a good or bad payer of bills. For example, with Equifax, a score below 299 is very poor, 300-349 is poor, 350-399 is fair, 400-474 is good and above 475 is excellent.

To get a better indication of how you can improve your credit score, you need to take out a more detailed (and expensive) credit report. It costs from £12. With this, you get a full list of your credit agreements.

How do I improve my score?

There are some basic checks you can make to improve your rating:

• Make sure all your debts are registered to your correct name and current address.

• Close credit cards you don't need.

• Ensure there are no other mistakes on your file, such as other people's debts or payments.

Other tips

One of the more alternative ways of boosting your rating includes taking store cards and paying off the balances on a regular basis. Opening a variety of accounts will speed up the process, but be sure to clear balances regularly to avoid sky-high interest charges.

It may be worthwhile asking a family member or good friend with a good credit history to co-sign for a small loan or credit card. This will re-establish good credit in your own name.

It takes some time for your new credit history to gain momentum, but it will help prove to lenders that you are reliable and credit worthy.

Another tip is not to keep applying for credit if you have been refused by other lenders. A large number of searches on your credit history can make matters worse, so make an application only after you have confirmed with the lender that you fit the profile of people they lend to.

Many people complain they have never applied for any credit - and therefore had no credit problems - yet have still been rejected. Bizarrely, the credit industry feels more comfortable dealing with people who have a track record of paying off credit so you do actually have more chance of making a successful application if, for example, you have taken out a mortgage or loan previously.

Tips for boosting your credit score

If you're thinking about buying a house or a car, your credit score is a very important number.

The interest rate you'll pay for the money you borrow will be determined, in large part, by this three-digit number that's generated from the information in your credit report.

Most lenders have carved-in-stone rules about handing out the best terms, and those rules almost always place a major emphasis on your credit score. If their best rates are offered to borrowers with a score of 700 or higher and yours is a 698, those two points could cost you thousands of dollars.

According to www.myfico.com, the consumer Web site of the Fair Isaac Corp. that created the FICO score (the most commonly used credit score), the interest rate difference between those two scores is about one-third of a percentage point.

On a $165,000 30-year fixed rate mortgage, that third of a point could cost you more than $11,172 in interest charges, assuming 629 percent is the lowest rate available (see Bankrate's calculators). Fall below a 660 and the rate goes up another .81 percent.

Keep in mind that these are averages. Most lenders today practice tiered pricing, with interest rates rising as scores go down. Each lender chooses its own "break points" between tiers. Lender A may bump up the interest rate if a score falls below 700, while Lender B doesn't charge higher rates until the score is 690 or below. So if you stick with one lender, and that lender's break point is 700, raising your score from 698 to 701 can be vital.

This underscores the importance of not only doing all you can to improve your score, but shopping thoroughly when looking for a mortgage. From the perspective of a mortgage broker, who can choose among a sea of many lenders, there are no sharp break points. Consumers should do what a good broker does -- look for a lender that offers the best rate for a specific score.

But that's jumping ahead of ourselves. First things first: You can take steps to improve your credit score. The number of variables that play into an individual score make it impossible to say that one particular action will increase a given score by a certain number of points. But there are some good guidelines.

"The mantra for getting a great score is pay your bills on time, keep account balances low, and take out new credit only when you need it," says Craig Watts, consumer affairs manager for Fair Isaac Corp.

"People who do that faithfully have very high scores. It usually means you're being conservative and cautious about credit. It's not a toy and it shouldn't be a hobby."

Speedy upgrade
That's good advice, to be sure, but these actions take a long time. What if you're house hunting and you just need a few extra points to bump you over the line to the great rates?

Start by pulling your credit report and your credit score to see where you are. To get an estimate of your credit score, check out our Credit Score Estimator. If your score is above a 760, you're golden. Improving your score from 760 to 800 won't get you better terms.

How To Get Your Free Credit Report

You're entitled to one free credit report per year, here's how to go about getting it.

Under the Fair Credit Reporting Act, you're entitled to one free credit report every year. Here's how to go about getting it.

They say the best things in life are free, and these days, a free credit report is just what we need. Many people are finding that in order to get a good deal on a loan, they need a pretty stellar credit score. And the only way to know your credit score is to check your credit report.

Seven Steps To A Higher Credit Score

Not only will reviewing your credit report help you get an idea of what your credit score may be (you do have to pay for your actual credit score), it will also allow you to confirm that all the information is correct. One small mistake on your credit report could seriously affect your credit score and potentially cause your rates to skyrocket.

There is only one place to get your free, federally mandated credit reports, also called an "educational credit report," which this is AnnualCreditReport.com. You are allowed a free credit report from the three major consumer reporting agencies in the U.S." Experian, Equifax (nyse: EFX - news - people ) and TransUnion. These sites also offer credit reports, but you have to pay for them. When you go to AnnualCreditReport.com, you are given the option to get all three reports at once or one at a time. Choose to get all three reports at once. Gerri Detweiler, author of the book Stop Debt Collectors, explains that when you apply for a loan you probably won't know which report a lender will use. So if there is a mistake on one, you'll want to know.

You've probably seen commercials for a "free credit report" (you may recall that guy playing his guitar in the seafood restaurant lamenting his predicament). Be aware that these companies will give you a free credit report and/or credit score initially, but they will also most likely also ask for your credit card number. If you don't cancel within a certain time, they'll charge you for membership.

Checking your credit report is called a soft inquiry, and you can check your credit as much as you want without it negatively affecting your credit score.