Beginner's guide to...Improving your credit score

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The Independent Online

Unless you have been living in a cave, you'll know it has become much harder to borrow money, whether it is a loan, a credit card or mortgage. Lenders look at your credit score when deciding whether or not to lend you cash, and that's based on your borrowing history. So how can you polish up your rating in order to qualify for the best possible deals?

Make history

Believe it or not, if you've carefully avoided taking out a loan or using a credit card, you won't have a high score. Lenders need to see you have successfully managed credit in the past. If you don't have a history, consider using a credit card for your shopping and repaying it every month. This may seem like a bit of a vicious circle because many deals are available only to those who have a good credit score. However, some cards from providers such as Barclaycard and Capital One are specifically aimed at those trying to build a credit history. You will also struggle to get credit if you are not registered to vote because many firms use the electoral roll to check people live where they say they do.

See clearly

If you want a new credit product, get hold of your credit score first. For just a couple of pounds, you can see exactly what the lenders will see – and have any errors amended.

If you have county court judgments (CCJs) against you that have been settled, make sure your score shows they are sorted.

Seeing your credit report will also help you to assess more clearly the kinds of loan and credit card deals for which you are likely to qualify.

Play your cards right

Close down unused credit cards: providers look at the amount of credit open to you when they are considering your application.

You should also try to pay off loans and other credit options early where you can, as lenders consider that a good sign. Set up direct debits to make sure you always pay on time.

Apply the brakes

Don't keep applying for credit if you have been refused. Get hold of your credit score and make an informed decision about what you might qualify for. Applying for loans leaves a "footprint" on your credit file and making several applications over a short period of time can damage your score.

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