Having a low credit score affects your ability to take out credit. You can always improve your credit score, but you’ll need to take some steps to achieve this.

What is a credit score?

A credit score is a numerical rating given to an individual based on their financial lending history. All lenders can access your credit score and they will use it to determine whether to lend you money.

You won’t just have one credit score. Each credit reference agency is likely to give you a different credit score based on the information they hold, and individual lenders may also give you custom credit scores based on other information they hold.

If you have a poor credit score, this could be due to you not paying your debts back in full and on time. If you have a good credit score, you have been deemed a reliable borrower of money.

How will my credit score be affected?

Your credit score will be affected every time you:

  • Apply for credit
  • Take credit out
  • Pay credit back
  • Fail to pay credit back

It’s worth noting that you shouldn’t apply excessively for credit; it could be seen by lenders as panicking, and simply you aren’t sensible with your money. You should also not look to take credit out whilst being unable to pay existing debt and should aim to pay any loans back in full and on time.

If you don’t overdo the amount you borrow and if you pay it back as agreed, your credit score may well improve over time. This means lenders are more likely to trust you and may offer you better interest rates on future credit offerings.

How can you check your credit score?

There are several credit reporting companies that can show you your credit score online. You may have to pay a small fee for it but some providers offer a free service. These companies include Experian, TransUnion, Noddle and Equifax.

How can you improve your credit score?

Be on the Electoral Roll

If you register to vote, your name and address will appear on the Electoral Register and creditors can access this to verify your name and address. It gives them peace of mind that you aren’t trying to mislead them in any way.

Pay back the money you owe on time

Simple but effective! If you show you are a good borrower, lenders are likely to offer you their products and services in the future, maybe at better rates of interest.

Be careful with your credit

If you intend to take out credit, you should only do so if you believe you can pay back the full amount in a timely manner. Although there may be a temptation to take out credit from multiple lenders, to cover various expenses in the short-term, you should try and stick to what is affordable in the long-term.

Don’t over-apply for credit

If a lender sees that you have been excessively applying for credit, they could view you as desperate and a potential risk. Every time you apply for credit, this will be marked on your credit score, so be wary of how this looks to lenders.

Cut ties with risky connections

If you feel your credit score has been negatively affected by a financial link to somebody else, such as an ex-partner, you can ask the credit reference agency to remove this link. If you can prove you’re not associated with the negative score, this will help your case to have it removed from your file.

How long will my credit score take to recover?

There is no exact amount of time it’ll take for your credit score to recover. It could take weeks, in some cases months or even years.

You could repay credit to two different lenders and it may take both of them varying amounts of time to update your records. This means each lender could update the credit reporting companies at different times, delaying the change in your credit score.

If you are sensible with the credit you borrow, you will be at less risk of having a poor credit score. Therefore, you can look to build on your current score rather than trying to recover it. The sooner you pay back your debts in full and on time, the better your credit score is likely to be.

Get debt help and advice

You don’t need to worry about debt alone. Find out more about debt and receive free, professional advice from PayPlan at PayPlan.com. Our advisers are here to help and they will be happy to talk to you about your financial situation. Get in touch today by calling our freephone number: 0800 316 1833 .