Having a bad credit score
A credit score is a rating system used by lenders to help them decide whether they should lend to you or not based on the way you manage your finances. The better your score, the more likely you are to pay back any credit they give you – whether it’s a small loan, a mortgage, or even a mobile phone contract.
As well as the details you provide on an application form, and from any accounts you hold with them now or in the past, lenders will also look at information from a credit report held by a credit reference agency.
The three main agencies in the UK are Equifax, Experian, and Callcredit. Each piece of information collected from them is given a certain number of points by the lender, depending on the risk involved, and these points are added together to give your credit score.
There is no single score that all creditors will use when deciding whether to accept somebody as a customer but a bad credit rating may mean your application to borrow money is more likely to be turned down.
The good news is that a bad credit score won’t stay with you forever. Negative credit information will gradually be removed from your report but it’s important to realise that there’s no quick way to fix it. The best way to rebuild your credit score is by managing your finances responsibly over time.
How can I repair my bad credit score?
There are a few simple steps you can take to improve your credit score and to start restoring a positive credit history:
Show financial stability: Make sure you make each of your monthly payments on time and always stay within your credit limit. Set up a regular direct debit to automatically pay your credit card each month if you have one.
Check your credit report is accurate: Your credit report contains data used to calculate your credit score. Check it thoroughly to make sure it is accurate, e.g. there are no late payments incorrectly listed and that the amount owed is correct.
Get yourself on the electoral roll: If your name and correct address aren’t on the electoral register, you could be refused credit. You can register to vote online through the UK Government's website.
Think before applying for new credit: Recent or frequent applications for new credit can have a negative impact your credit score.
Close old credit card accounts: Even if you owe nothing on the cards, a lender will look at all of your available credit before they make a decision on your credit application.
End financial associations with ex partners: Joint financial products, like a joint current account, could influence your score. Ask credit agencies to add a ‘notice of disassociation’ to your file if you’ve already cut financial ties.