How to improve your credit score in 14 steps

Disclaimer: this guide aims to help you improve your credit score, but not all steps will apply to all customers, and we can’t guarantee an increase in your credit score.

Whether you’re buying a car with good credit or applying for car finance with bad credit, there are always ways to improve or maintain your score. Having a strong credit score is one of the best ways to secure car finance.

Strong credit proves to lenders that you are financially reliable. The higher your score, the less risky you’ll seem to lenders. This makes learning how to boost your credit score essential.

To help you out, we’ve picked out 14 of the simplest ways to improve your credit score that you can start doing today, as well as answering some of your frequently asked questions.

1. Register on the electoral roll

We’ll start with the easiest step of all. Signing up on the electoral roll is simple and easy to do.

The electoral roll is a list of the names and addresses of people registered to vote in public elections in the UK and Northern Ireland. When you register to vote, your electoral details are recorded on your credit report.

Being on the electoral roll can improve your credit score as it helps lenders confirm your name and address, and enables them to check that you have lived at your address for the length of time stated on your finance application.

If you are already registered on the electoral roll but have recently moved, then make sure to update it to your latest address.

2. Make current payments on time

Another way to boost your credit score is showing lenders you’re reliable at paying back loans on time and in full. This could include:

· Credit card repayments

· Utility bills

· Phone contracts

· Repaying other outstanding loans, like mortgages

Managing your accounts effectively is one of the best ways to boost a credit score, gradually increasing it over time.

3. Avoid the top end of your credit card limit

While not always possible, if you can, try to avoid being at the top end of your credit limit, as lenders can see this as a sign of financial distress. As a guide, keep your credit utilisation to around 30% of its overall limit. For example, if you use £500 on a card with a credit limit of £1,000, your credit utilisation is 50%.

4. Use your overdraft sparingly

You might not be aware of this, but your overdraft actually appears on a credit report as debt. Lenders are aware of overdrafts but going into them regularly is a sign that your finances are not as secure as they could be.

However, if you do need to use your overdraft, by staying within the agreed limit and clearing it on time each month, you’ll prove you’re a reliable borrower, which can in turn improve your credit rating.

5. Keep credit applications to a minimum

You want to try to avoid making multiple credit applications within a short space of time, as it makes lenders think you rely too much on credit.

It doesn’t matter what form of credit you apply for, or the amount you require; each application’s hard search can be seen by lenders. Instead, it’s a good idea to space applications out if you want to boost your credit score.

Note: this does not include ‘soft searches’, such as when you apply for car finance from Zuto.

6. Updating your details when moving house

If you’ve moved house or are about to, make sure all your current bills are updated and sent to your new address. If not, you may be receiving bills at an old address that remain unpaid.

7. Settle any credit disputes as soon as possible

A default on your credit report signifies that you should have made a payment and didn’t. Naturally, if you think the default is incorrect, it can be disputed. This is important if you’re applying for car finance with defaults on your credit file.

If you think the dispute is an error, you should complain to the lender that put it there, raise it with the Financial Ombudsman Service, or add a notice of correction. If you can explain how the error has happened and that it’s not your fault, you can wipe the default and boost your credit score.

8. Ask lenders for soft searches

When looking for finance, you should always use companies that perform soft searches first. This means that any enquiries you make can’t be seen by other potential lenders. In contrast, hard searches are visible on credit reports and can impact your score.

Zuto always performs soft searches when checking your eligibility for finance and will always ask you before performing a hard search. In fact, we’ll only carry out a hard search when you’ve asked us to proceed with a specific loan agreement.

9. Never round up your time at an address

One of the simpler tips to improve your credit score, the more insight a lender has into your details, the more likely your application is to be accepted.

For this reason, you should avoid rounding up time at an address. For example, don’t state two years and six months as three years. As most lenders only ask for three years’ address history, it should be easy to give the correct information.

10. Cancel any unused credit and store cards

Unused credit and store cards can have a big impact on your credit score without you knowing. Access to too much available credit, even if it isn’t used, can impact a lenders decisioning process.

If you’re looking for a quick way for how to improve your credit score, it’s a good idea to cancel some cards, especially if you haven’t used them in a long time.

11. Be honest about timing when applying

Always consider potential changes to your personal circumstances when applying for credit. Your score may be higher when earning, but, if you’re due to take time off for maternity leave or you fear potential redundancies where you work, you should be honest about this.

While you’ll be more likely to get a loan before the change, it’s crucial to make sure you’ll be able to afford the repayments if you suffer financial difficulties.

It’s also worth remembering that big issues, such as county court judgements (CCJs) and bankruptcy, can stay on file for six years. So, if you’re nearing a time when an old issue could lapse, hold off.

12. Financially delink

If you split up with someone you had joint finances with, you don’t want their credit history to affect yours going forward. Fortunately, you can contact credit agencies and ask for a notice of disassociation. However, you will need to close all joint accounts and pay off any joint loans still active.

13. When making a finance application, stay within a sensible limit

When you make an application for finance, applying for a potentially unaffordable amount may result in you being turned away. Many lenders take affordability into account, so for example if you earn £1,200 per month and you apply for £30,000 lenders will take the monthly repayments into account.

14. Check your credit report annually

Lastly, for those looking for ways to improve their credit score, it's always a good idea to go through your credit report at least once a year or before any new applications. Your report contains huge amounts of data and there could be errors that you’ll want to be aware of and correct before applying.

Zuto’s partner, ClearScore, can even send you regular updates, so you can monitor the impact of any changes to your credit score as and when they occur.

What credit score do I need for car finance?

Generally speaking, the higher your credit score, the more likely you are to have your application accepted. Here at Zuto, no matter what your credit score is, we might be able to help you get car finance. We work with lenders that will try to find you a deal, even if your score is poor or bad.

Find out more in our guide: What is a good credit score?

Why is my credit score important when applying for car finance?

When you apply for car finance, your lender will consider a range of factors to determine how much you’ll be able to borrow and at what rate.

If you have a great credit score, you’ll usually be offered the best rates, whereas a poor credit score can mean you’re offered car finance with a slightly higher rate of interest. This is because you’re considered to be a higher risk to lend to.

Find out how much you might be eligible to borrow with our handy car finance calculator.

Does applying for a car loan affect my credit score?

Applying for car finance with Zuto won't affect your credit rating. If you apply for quotes with Zuto, we'll just carry out a 'soft search' – this simply tells us your score and can’t be seen by other lenders.

When you confirm you'd like to proceed, we’ll then conduct a 'hard search', which gives lenders more details and is recorded on your file. Contact us today to find out more.

How quickly can I increase my credit score?

Some of the above actions can make a swift change to your score, like paying bills on time and utilising less of your available credit. However, other actions may take longer.

As credit scores are decided by various factors, you may have to address a number of issues over some time to see a difference. That being said, be sure to read our article on how to raise your credit score quickly to see what you can do today.

Why should I improve my credit score?

Improving your credit score is the most effective way of enhancing your chances of getting car finance, or any form of credit; it’s as simple as that.

With these 15 tips to improve your credit score to hand, you should have an easier time boosting your rating and getting any finance applications accepted. For more advice, head over to the Zuto blog, or discover even more credit information from our experts on our car finance help and advice hub.