From loans to phone contracts, a good credit score can unlock better deals. Here’s how it works, how to boost it, and where to turn if we’re struggling.
Everybody has a credit score, it’s just that we don’t always know it. It’s a number that tells lenders how risky we are to lend to. Most of us don’t think about it. Until we get turned down for something. That’s when it suddenly matters.
Credit reports
Every score comes from a credit report. Every time we pay a bill, take out a loan, use a credit card or miss a payment, it’s being logged somewhere.
Anyone we ask to borrow money from or set up a direct debit with will check our report to see if we’re likely to pay on time – not just bank loans or credit cards but things like telephone and broadband contracts, and gas and electricity too.
We can check our credit report for free. Money Helper has a guide for how we can get a copy of our report on their website.
A stronger credit score can mean:
- Getting accepted for loans, credit cards, mortgages or car finance
- Lower interest rates, so borrowing is cheaper
- Higher limits if we do borrow
A weaker credit score can mean:
- Applications for credit cards, loans or finance may be rejected
- We might only be offered higher interest rates, which cost more over time
- Some deals simply won’t be available to us at all
How to improve your credit score:
Build up your credit history
Before we even think about boosting a score, lenders need to be able to place us properly. If there’s nothing on the file, or not much, it’s harder to get accepted. So the goal is to build a track record that shows we can handle credit properly.
Start here:
- Get on the electoral register: It helps prove who we are and where we live
- Open a bank account and stay well below the overdraft limit (no more than 25%)
- Get a credit card: Apply for credit you are likely to get – useful tools on price comparison sites allow you to do this
- Take out a small form of credit: This might be a mobile phone contract or store card.
- Boost what’s already there: Tools like Experian Boost Scheme can factor in things like council tax payments or subscriptions.
- Paying rent? Make it count: The Rental Exchange Initiative can turn rent payments into credit history if your landlord is signed up
Improve your score and avoid damage
Once something’s on the file, it’s all about how we handle it. A credit score isn’t built overnight. It comes from showing, over time, that we can borrow and pay back without things going off track.
Focus on:
- Pay everything on time: Never miss payments or make late payments if you can help it. Direct debits can help with this
- Keep credit use under control: Using a high chunk of our limit can make it look like we’re relying on credit. We also want to limit how many credit cards we apply for, especially in a small space of time.
- Sort out old debts properly: Set up agreements to pay old debts and sure debts are registered to the correct name and address
- Check our credit report regularly: Mistakes happen. If something’s wrong, get it corrected.
Avoid loan sharks and risky quick fixes
If we keep getting turned down, it can feel like there are no options left. That’s when risky lenders start to look tempting.
Loan sharks are illegal. No checks, no rules, no safety net. What starts as a quick fix can spiral fast with huge interest, added fees, and pressure to repay.
Warning signs to watch for:
- Cash loans with no paperwork
- No clear interest rate
- Being asked to hand over bank cards or documents
- Pressure or threats if we fall behind
The Illegal Money Lending Team tackles loan sharks. We can access free and confidential support or report illegal money lending by contacting the 24/7 helplines below.
England: Call ✆ 0300 555 2222, (07700 102773 on Whatsapp, Mon-Fri 9am-5pm) or email reportaloanshark@stoploansharks.gov.uk
Wales: Call ✆ 0300 123 3311 or email stoploansharkswales@valeofglamorgan.gov.uk
Scotland: Call ✆ 0800 074 0878 or email stopillegallending@cosla.gov.uk.
Safer options:
- Credit unions: Not-for-profit lenders offering more affordable loans and support. Citizens Advice has more information about Credit Union loans on their website.
- Credit builder loans: Designed to help us build a credit history while we repay. Payments are reported, helping show lenders we can stay on track. Click here for more information.
