As interest rates have gradually climbed to a high not seen since the peak of the financial crash in 2008, the cost of  credit has climbed up with it, but there are ways that you can improve your credit score to deal with the build  up of financial pressure.

Your credit score is calculated by three credit reference agencies, who compile information on how you manage credit and make payments which is known as your credit file.

If you apply to a bank for a loan for example they would typically run a credit check over you to see how risky that lending money to you would be, and the check will influence what kind of interest rate you would be charged.

 

The steps to take to improve your credit score

First of all make sure that you check all the details in your credit report, report any mistakes.

You can check your credit score for free using MoneySavingExpert’s Credit ClubOpens in a new window for Experian,  ClearScoreOpens in a new window for Equifax and Credit KarmaOpens in a new window for TransUnion.

It would be beneficial for a start to ensure that you are on the electoral roll at your current address.

Also build up your credit history as having little or no credit history makes it very difficult to properly assess you, it’s a problem that is common amongst younger people.

You can take the steps to build your credit history, such as making regular payments on time as this show that you are reliable in paying back what you have borrowed.

This can be arranged through a regular direct debit payment, and be wary of any joint account with someone who has a poor credit history, if this is the case you can request a ‘notice of disassociation’ to stop your credit files from being linked.

It would also help your cause to stay within any overdraft limit.

If you have older and well managed accounts, make sure that they become known as this will improve matters.

Any lender would see it as a huge bonus to your credit reliability if you have previously managed several credit accounts, many credit scoring models tend to reward you for having long-standing, mature credit accounts.

Keeping control of your credit utilisation as low as possible is also a help.

For example if your credit limit is £2,000 and you have used half of that then your credit utilisation is classed at 50%, whereas a much lower score than that would be seen as positive by lenders increasing your credit score.

You must also beware that if your are a victim of fraud in anyway, as someone who has had access to your details could take advantage by borrowing credit in your name, so watch out for any applications that you do not recognise.

Also avoid moving home on a regular basis, of course there are circumstances where this is difficult.

Stability is an important quality for lenders, and if you are constantly moving around it could lead to some parties thinking that you might have issues paying rent.

Another way to improve your credit rating is to turn to a credit builder card which  can rebuild your credit score, they typically have low spending limits and higher interest rates.

The builder cards can be effective if you use them for a small amounts of spending each month such as on essential groceries, but  make sure you repay the card on time and in full each month to avoid paying interest.

Also there is the Experian Boost Scheme option, which you can sign  up to as a free service.

The firm says that the scheme will help boost your credit score by simply sharing how you spend and manage your money.

It allows you to reveal information over your regular spending, such as payments to savings accounts, council tax payments and digital entertainment payments to the o the likes of Netflix and Spotify.

As long as you are not spending more than you earn and you are making all the correct payments regularly, then you should receive and instant boost to your overall credit score.

 

Avoid Credit Repair Agencies

It’s important to ignore any adverts from companies that say that they can repair your credit rating.

In reality what most of them will do is advise you on how to see your credit report and improve your credit rating, but that is something that you can do yourself and for free.

There are some companies that may claim they can do things that legally they can’t, and in some more extreme circumstances they might even encourage you to lie to the credit reference agencies.

It’s vital that you never use or trust these firms.