Got Your Number? Understanding and Improving Your Credit Rating

Understanding and Improving Your Credit Score. How to boost your credit score to get a mortgage

I need to increase my credit score, Where do I start?!

Up until my mid twenties, my credit score was not even remotely on my radar. I had never thought about what it might be, if I had one, how to improve it, or even how to find out what it was.

I really began focusing my efforts on how to increase my credit score to buy a house, however, I did start to pay a bit of attention to it about a year before that. I signed up for a free website which gave me a very basic rating, but after a few months, I wanted more information and registered to receive my full credit report. Experian, and most of the other credit checking websites, will offer a free 30 day trial ahead of a monthly subscription.

While I’m aware there are many other popular sites for credit reports, I’ll be focusing on Experian, as that is what I used. Clearscore is another site I often hear people referring to, I have registered for this but found it was lacking some of the in depth information Experian provides. It is a good starting point however, if you have already used your free trial for Experian and don’t want to pay again yet!

To begin with, I started my free trial, downloaded my report and cancelled immediately so as not to be charged. This gave me something to focus on and helped me to become more aware generally of my score. Don’t get me wrong, mine wasn’t terrible, just somewhere in the “average” range. I do wish I had looked at it earlier, however scary it may have been! Some debts, such as my rent arrears, would never have been taken into account when calculating my score, however, other smaller debts will have done.

I don’t understand my credit report, What does it all mean?!

It can be pretty daunting first looking at your credit report. Experian is good at providing information along the way, but over the years I have picked out the main sections I look out for.

Credit Accounts:

This is the first section you will come across on your report, and lists all of your credit agreements. This will include bank accounts, credit cards, loans etc. It will also include closed accounts for 6 years after the closure date.

This section will refer to your available credit and credit balance. Aside from the obvious making your bill payments on time, probably the next biggest thing to be aware of is your available credit usage. This is where having a credit card comes into play.

When I picked up my first credit card with a £200 limit, I was often using a high percentage of my available credit. As soon as this limit was increased to £1500, I was suddenly using a much lower percentage. This had a two-fold positive effect on my rating, as I now had a higher amount of available credit, plus I was now proportionately less of what was available to me.

The average age of your accounts is also featured in this section. Again, this will show both open and closed accounts (for up to 6 years after closure). The higher the average age of your accounts is, the more positively it will affect your rating. This is the main reason I still hold my current accounts where I do, and I have kept my Barclaycard all these years despite never using it, as they are my longest standing accounts and greatly increase the average age overall. My mortgage had a negative effect for 12 months after opening, but is now showing as a positive as it is paid on time each month.

Searches & Records:

This will show any searches on your credit account in the previous 6 months. After 6 months, these searches stop having a negative effect. There are two types of searches, the first, a soft search, is nothing to worry about, these will show on your report but do not affect your score. I currently have a couple on mine, from using a comparison website to price car insurance recently. Soft searches can often be performed by Experian themselves.

The second search, a hard search, tends to happen at the point of application, when you actually proceed with buying a product, signing for a loan etc. In my case, I currently have one hard search from changing my gas and electricity suppliers, it’s now 5 months old, so will disappear next month.

This section also notes whether you are on the electoral roll at your current address. This is by far the easiest thing you can do for a boost in your credit score! If you are not registered, you can do so here. 

Additional Factors:

This includes previous addresses you have been linked to, any person you have been financially linked to, if you have changed you name, whether you have ever been a victim of identity fraud etc. I highly recommend checking through these details thoroughly, as they can be incorrect, and you may have a lowered rating due to misinformation on your file!

How I used this information to increase my credit score

By the time I was actually ready to start paying attention to my credit score, I had been saving regularly for several months and had built up a fairly decent pot after stamping out some debts.  Despite this, I was still pretty much ignoring my interest free student overdraft, and even when I did begin making payments towards it, they were minimal and I just wasn’t really focused on it.

This was my “Square One”. My overdraft was the only outstanding debt registered on my credit report and apart from that, there wasn’t much else to go on. I immediately withdrew the cash from my savings to clear the remaining balance, and waited the frustratingly long period of around 8 WEEKS for my score to update.

I don’t think there is anyone out there who would not advise that paying off any outstanding debts should be your first priority. It’s an added bonus if, like me, you already have the savings there to do this in full. If not, that’s no biggie! As long as you make the minimum payments on time for each debt, you will be building on your credit rating. It may take a little longer, but I promise you, this is the best thing you can do to keep on top of your credit score.

In the meantime, I applied, and was rejected, for a basic credit card. Within a couple of months, I received a pre-approved application from Barclaycard for their Initial Visa. I went with it, on a limit of £250 to begin with. I began to make small purchases on it, and paid it off immediately. I had always been wary of having a credit card as I don’t think I could have trusted myself with one in my younger years…so I really was careful to pay if off in full!

I was still able to check my basic score via my Experian account even without paying, and was constantly on the lookout for updates. It did take a couple of months, but I saw a huge increase in my credit score after paying off my overdraft! I was over the moon at how easy it had been!

And then of course, reality kicked in. Where to go from here? I had tackled the big things hindering my score, now I was faced with things which were entirely out of my control, things like “Average Age of Accounts”.

I became a bit disinterested again for a few months, until I began seriously looking at purchasing property, and it came back on my radar. I was pleased to see that my score had increased again, not as drastically as the first time, but it seemed that my regular credit card turnover was having an affect. For anyone who does not currently hold a credit card, I definitely recommend it. Even if you are not thinking about your credit score just yet, it’s a great start, providing you pay it off every month! To stop myself spending more than I could afford, I would either pay off the balance as soon as I had purchased something, so often making several payments across the month, never waiting for my bill, or I would move the amount I had spent over to a seperate savings account, then pay it all from there at the end of the month. This way, I never spent more than was already in my current account.

I restarted my Experian subscription (having to pay for it this time, worth it if you are about to apply for a large loan like a mortgage!) and began to keep a closer eye on my score. Around this time, my credit card limit was also increased, hugely by the way, to £1500. I still never used it for any more than around £200 per month, which meant that I had a larger amount of available credit, and was using a smaller percentage of that credit.

One setback during this time, was when I paid my first visit to a mortgage advisor. I went to see the in house advisor at my bank branch, just to get an idea of where I stood. I was probably 6 months to a year off actually applying for a mortgage, but was clueless as to how much I may be able to get, how much of a deposit I would actually need and what the application process involved. During this meeting, the advisor told me she was doing a soft search, which would not affect my credit score. Shortly after, my score dropped inexplicably, and upon checking, it turned out she had in fact, began a mortgage application for me. Needless to say, I did not ever go near her again, and found my own independent mortgage advisor who was fantastic!

This search stayed on my credit report as a negative for 6 months, which pissed me off no end, but when it was removed after 6 months, my score went up to “excellent” and I was looking pretty good. I ended up applying for my mortgage around 1 year after that initial meeting with the mortgage advisor. In total, I would guess it took me around 18 months to boost my score from an “average” of around 700 to “excellent” at 999. I’ve been asked by people how to increase my credit score immediately, what is the fastest way to increase my credit score, and while I have plenty of tips, there really is no all rounder quick fix. Everyones situation will be different, and you will need to adapt your repayment schedule to suit your needs.

I cancelled my Experian account again straight after having my mortgage application accepted, and focused on other pressing issues, like what colour to paint the windows, and where to put the couch. I can still view my score via my bank account and I’m currently punching in at 982, which is pretty sound. It’s been up and down over the past couple of years as I have applied for a couple of new credit cards, making the most of rewards and cashback. I’m just about to repeat that cycle too, so am expecting it to go quite a bit lower in the next 6 months.

I’m not worried about this, I feel like now that I understand my rating, and know how I can affect it, I will be able to improve it again when the time is necessary.

**Edit – Since beginning to draft this post, I have checked in on my Experian score again. It had dropped significantly and I couldn’t think of any good reason, so I ended up restarting my subscription to check out my full report. It seemed like a lot of accounts were missing, so I called them up an within a few minutes, they had been relinked for me. I’m not sure how, or why this happened, but it is ALWAYS worth double checking any information on your report and flagging anything which looks incorrect. This was a points difference of 115! Experian make the process really simple, I always pick up some new tips when I contact their customer services team!

How to boost your credit score by 200 points fast

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