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How to improve your credit score in 15 steps

How to improve your credit score in 15 steps

Whether you’ve got an excellent, good, poor or bad credit rating, there are always ways to improve or maintain it – and we’ve picked out 15 of the simplest.

Having a strong credit score is one of the best ways to secure car finance. It proves to lenders that you are financially reliable. The higher your score, the less risky you’ll seem to lenders.

Whether you’ve got an excellent, good, poor or bad credit rating, there are always ways to improve or maintain it – and we’ve picked out 15 of the simplest.

1. Register on the electoral roll

We start with the easiest step of all. 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. It helps lenders confirm your name and address, so your score increases.

2. Make current payments on time

Show lenders you’re reliable by paying all your loan, credit card and utility bill payments on time and in full. Well-managed accounts usually have a positive impact on credit scores.

3. Avoid the top end of your credit card limit

Try to keep your credit utilisation to around 30%. This is the percentage of your credit limit that you use.

For example, on a card with a credit limit of £1,000 and you use £500, your credit utilisation is 50%. A lower percentage is likely to increase your score.

4. Use your overdraft sparingly

An overdraft appears on a credit report as debt. But if lenders see that you can stay within the agreed limit and are able to clear it on time each month, it proves you are a reliable borrower.

5. Keep credit applications to a minimum

Try to avoid applying for credit frequently in short spaces of time. 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. It’s a good idea to space applications out.

Note: this doesn’t include ‘soft searches’, such as when you apply for a quote from Zuto. To help understand the difference in a hard or soft search, read our guide.

6. Moving house

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

Some lenders don’t like to see somebody who’s moved house too often, as they like to see stability in people’s circumstances.

7. Settle any credit disputes

Defaults on credit reports can cause problems. A default means the report shows you should have made a payment and didn’t. If you think the default is incorrect, it can be disputed. Check if the default shows up on the other credit reference agency reports.

If you think the dispute is an error, you could complain to the lender that put it there, complain to the Financial Ombudsman Service or add a notice of correction. This would slow the process down, but if you can explain how the error has happened and that it’s not your fault, it’s worth doing.

8. Ask lenders for soft searches

When looking for finance, use companies that perform soft searches first. This means that any enquiries you make can’t be seen by potential lenders. Hard searches are visible on credit reports.

Zuto always perform soft searches when looking for finance for you and will always ask you before then performing a hard search. We’ll only need to carry out a hard search when you’ve asked us to proceed with a specific car loan agreement.

9. Never round up time at an address

The more insight a lender has into your details, the better. 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 some unused credit and store cards

Unused credit and store cards can have a big impact on your credit score. Access to too much available credit, even if it isn’t used, can hinder applications, so it’s a good idea to cancel some cards.

11. Avoid payday loans

Steer clear of payday – also known as short-term – loans if possible. Even though they may be tempting to choose in short-term financial emergencies, they are expensive and some mortgage underwriters state they reject people who have taken one.

12. Don’t withdraw cash on credit cards

Even without a credit score to consider, this is never a good idea. Withdrawing cash on credit cards is expensive due to the interest charged. Even if you do repay in full every month. Lenders can see this as evidence of poor money management.

13. Be honest about timing

Consider potential life changes when applying for credit.

You score higher when earning, but, if you’re due to take time off for maternity leave or you fear potential redundancies where you work, remember to be honest. You’ll be more likely to get a loan before the change, but it’s also crucial to make sure you’ll be able to afford the repayments.

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

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

15. Check your credit report annually

It's a good idea to go through your credit report once a year or before any applications. They contain huge amounts of data on you and there could be errors. You will want to be aware of, and correct any, before applying.

Zuto's partner ClearScore can even send you regular updates, so you can monitor what impact your changes are having.

What is a good credit score?

Each credit reference agency has its own scoring system.

They calculate it based on information sent by lenders about your credit and how you manage it. Once they have enough information they will generate a report.

Zuto is partnered with ClearScore, which uses Equifax’s data. ClearScore then has its own rating out of 700, and says:

  • 0-279 is very poor
  • 280-379 is poor
  • 380-419 is fair/average
  • 420-465 is good
  • 466+ is excellent

What credit score do I need for car finance?

Whatever your credit score might be, Zuto works with lenders that try to find you a deal. If your score is poor or bad, we may still be able to help you get car finance.

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.

When you confirm you'd like to proceed, there'll be a 'hard search', which gives lenders more details and is recorded on your file.

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How quickly can I improve my credit score?

Some of the above actions can make a swift change to your score, others 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.

Why should I improve my credit score?

Improving your credit score is the most effective way of improving your chances of getting car finance and any other finance.

For more advice, keep reading the Zuto blog, or find out about our car finance options, plus tips on how to apply for car finance if you have bad credit.

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