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How to improve your credit rating

A poor credit score can narrow your options when it comes to credit, but if your rating isn't as good as you'd hoped, don't worry - there are plenty of ways to improve it.

Why do I need a good credit rating?

Most of us will apply for credit at some point in our lives - whether that's a loan, a mortgage, a credit card or even a new mobile phone contract. This is when having a good rating can improve your options. Lenders use the information available in your credit history to determine the risk of lending, and your score is based on a variety of things, including past repayments and current borrowing.

What makes a good credit score?

If you're having difficulty getting accepted for a credit card, this is usually down to a low credit score, or it simply means you haven't built up enough of a credit history for lenders to assess the risk. A person with a good credit rating will likely have a history of using a credit card - or another financial product - and making payments on time, not exceeding their credit limit or breaching the terms stated in their lender's contract.

Improving your credit rating

There are plenty of ways you can improve your credit rating.

  • The simplest way to get your score back on track is to spend sensibly. Lenders want to see that you're a responsible customer, so making small and regular payments or paying the balance in full each month is a good way to show this.
  • Having one credit card at a time is one way to help manage monthly payments in full. If you have unused cards sitting around in your wallet, consider cancelling them to take away the temptation to spend more. Lenders will also look at how much credit is already available to you, so other cards could affect your rating even if you're not using them.
  • If you have a joint account, mortgage, card or loan with someone with a bad credit history, this can affect your ability to get good credit (this is known as 'financial association').
  • Credit reference agencies use your electoral roll information to confirm your identity, so it might be worth registering (if you haven't already).
  • Finally, if one lender has refused your request, it may be an idea to put applications on hold until your score has improved - each request is recorded and too many could cause you to receive a lower rating.

Other options that are specifically designed for people with poor credit ratings include credit builder or pre-paid cards. Some pre-paid cards give their users a credit-building option to help improve their score, whereby the lender loans a set amount on the card, and the borrower agrees to pay it off in monthly instalments. If you don't miss a payment in one year you'll have 12 months of good credit history registered on your score, helping lenders to see you as a sensible spender.