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How to check and improve your credit score
Nick Daws offers helpful tips on checking and improving your credit score.
Today I’m turning the spotlight on a vital aspect of your financial health. Your credit score affects everything from loan approvals to mortgage rates. It’s a measure of how reliably you handle credit and debt, and lenders use it to assess risk.
Here’s everything you need to know to understand, check and improve your credit score.
Understanding credit scores
In the UK credit scores are managed by three main credit reference agencies (CRAs). These are Experian, Equifax and TransUnion.
Each agency uses its own scoring system, which can lead to some variation in scores. Generally, Experian scores range from 0 to 999, Equifax from 0 to 1,000, and TransUnion from 0 to 710. Higher scores are better and show lenders that you’re financially reliable, while lower scores indicate greater risk.
A ‘good’ credit score typically means:
- Experian: 721–880 is good, 881–960 is very good, and 961–999 is excellent.
- Equifax: 531–670 is good, 671–810 is very good, and 811–1,000 is excellent.
- TransUnion: 566–603 is good, 604–627 is very good, and 628–710 is excellent.
How to check your credit score
Each credit reference agency offers ways to check your score, often for free or with a free trial.
Experian: You can sign up for a free Experian account to get an overview of your score. Paid plans are also available if you want detailed reports.
Equifax: Equifax partners with ClearScore to offer free access to your score. Signing up on ClearScore provides monthly updates and access to your credit report.
TransUnion: Check your TransUnion score with Credit Karma (formerly Noddle), which provides free score updates and insights into your credit report.
Each CRA allows you to request a statutory credit report for free. This provides a snapshot of your financial history. You can request this once a year from each agency, helping you keep tabs on your credit profile and verify its accuracy.
Factors that affect your credit score
Credit scores are influenced by a range of factors, including:
Payment history – making timely payments on credit cards, loans, and other debts has a positive impact. Late or missed payments lower your score.
Credit utilization – using a high percentage of your available credit can be seen as risky. Aim to use less than 30% of your credit limit across all credit accounts.
Length of credit history – a longer credit history with consistent payments can boost your score, while short histories might lower it.
Credit mix – a good balance of credit types (credit cards, loans, mortgages) can positively influence your score, showing you’re capable of handling different types of credit.
Recent credit applications – frequent applications for new credit can indicate financial instability and lower your score. Applying for credit in moderation is wise.
Tips to improve your credit score
If you’d like to improve your credit score, here are some steps to consider:
- Check your credit report for errors
Look over your credit reports for any inaccuracies, such as outdated addresses or accounts that aren’t yours. If you spot an error, contact the CRA to correct it.
- Make payments on time
Paying bills promptly is one of the most effective ways to boost your score. Setting up direct debits can help ensure you never miss a payment.
- Reduce credit utilisation
Aim to use only a small percentage of your credit limit. For example, if you have a credit limit of £1,000, keeping your balance below £300 is ideal. This ratio, known as credit utilization, is a major factor in your score.
- Build a long-term credit history
If possible, keep long-standing accounts open even if they’re not in active use. Older accounts can add stability to your credit history and increase your score.
- Limit new credit applications
Every credit application creates a ‘hard enquiry’, which temporarily lowers your score. Only apply for new credit when necessary, and avoid multiple applications within a short period.
- Consider a credit builder card
If you have a low or limited credit history, a credit builder card can help. These cards come with low limits and higher interest rates, but making timely payments on them can help build positive credit history. Just be sure to pay them off in full to avoid interest charges.
Use free credit score tools
Several services offer free tools to help you monitor and understand your credit score:
ClearScore – partners with Equifax to offer free monthly score updates, personalized credit offers, and insights into your credit report.
Credit Karma – offers access to your TransUnion report, complete with regular updates and tips for improvement.
Experian’s free service – Experian provides a basic score for free, along with options to monitor changes with their paid subscription plans.
These tools can help you understand what influences your score, track changes over time, and receive notifications for unusual activity, potentially alerting you to identity theft.
How long does it take to improve your credit score?
Building or improving a credit score is usually a gradual process. The time it takes varies depending on your starting point and the steps you take. Minor improvements, such as reducing your credit utilization or making a few timely payments, might result in noticeable changes within a few months.
If you’re dealing with more severe issues, such as past defaults, it may take several years of good financial habits to see significant improvements.
Key takeaways
Check your credit score regularly – this helps you stay informed and spot errors that could be holding you back.
Pay on time – consistent, on-time payments are crucial.
Limit credit use – using a low percentage of available credit can boost your score.
Build a history – maintaining accounts over the long term adds stability to your profile.
By actively monitoring and managing your credit score, you can ensure you’re in the best position when it comes to applying for credit, securing a mortgage or negotiating loan rates. Taking steps now can lead to a stronger financial future for you and your loved ones.
As always, if you have any comments about this article, please do leave them below.
Nick Daws writes for Pounds and Sense, a UK personal finance blog aimed especially (though not exclusively) at over-fifties.
Photo credits: Pexels
