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How Can I Improve my Credit Score to Qualify for Better Loans in the Future?

Author: Harry Jones And Facted Checked by : Shanie Capper
Last updated on : 21 May 2024

If you have ever been declined for a £100 loan or a financial plan due to a poor credit score you understand the crushing feeling. It leaves you disheartened as your dreams of a new car, home, or holiday are shattered and you don’t know how to change your fortunes.

If you aren’t in the know it can seem like an impossible task to boost your credit score and we understand the frustration. But don’t worry – it can be done with the right mindset, financial management and tools and we explain how in the below article.

1. Never Default on a Credit Card Payment

This should go without saying but it’s surprising how often people still miss their credit card payments. The moment you default on a card payment your credit score is impacted so make sure you keep track of your outgoings and always have enough to cover these bills.

2. Keep Your Personal Data Safe

Some unfortunate people have had their credit scores negatively impacted due to identity fraud. Cybercrime is a thing and it is vital that you protect yourself and use whatever security measures are available.

Use two-factor authentication to log in to accounts wherever possible and always use complex passwords – don’t just choose the name of your cat! Never give out your personal information either and it’s a great idea to use antivirus software too to protect your incoming and outgoing internet traffic.

3. Create a Budget to Manage Your Finances

The underlying theme involved in improving your credit score is to better manage your money and the best starting point for this is to create a budget.

Your budget doesn’t have to be complex so don’t worry about having epic Excel skills! You just need a document that shows your income and expenses on a weekly or monthly basis.

If you know exactly what you have to pay for and how much you earn you can better manage your money and keep on top of payments.

4. Monitor Your Credit Score

Although this isn’t something you should become fixated on it’s a great idea to actively monitor your credit score. There are many free tools available that allow you to do this without affecting your score.
If you check your credit score once per month for example you can track your progress and see if there have been any dramatic peaks or troughs. Depending on the report you may also be able to gain specific insight into areas of improvement.

5. Have a Range of Automatic Bills

Setting up direct debits and automatic bill payments is a fantastic and simple way to boost your credit score. If you have regular payments like utilities, car insurance, and rent, convert them to direct debits or monthly instalments.

Every time those automatic payments go out you are showing to prospective lenders that you are capable of making repayments.

6. Limit the Number of New Products You Apply For

Many people make the mistake of continually applying for new financial products and Quickquid loans once they have been declined.
This is a big no-no and is a surefire way to damage your credit score further. Typically when you apply for financial products hard credit checks are done and these stay on your records and accumulate towards your score. Therefore the more you apply for, the worse things look.

7. Avoid Closing Old Accounts

We often have a tendency to close old accounts to keep things easier to better manage our finances. Indeed this does reduce the chance of confusion but it can also damage your credit score.
If you only have a credit history for your new accounts then lenders cannot gain an overall picture of your financial history. By keeping old accounts open (even if you don’t use them) they can be used in your credit score calculations.

8. Maintain a Low Credit Utilization Rate

When applying for fast loans, lenders take into consideration your credit utilization rate. This is a percentage based on the credit you are using compared to the total amount of credit available.
The ideal rate is below 30% as anything above this shows lenders that you are relying on credit too heavily and don’t have the cash flow to actually pay for your purchases.

Have Patience and Use Alternatives as Your Score Improves

As you can see there are many ways you can improve your credit score but it can be a lengthy process. How long it takes exactly depends on your circumstance, the current state of your credit, and your financial situation.

If you do need a short financial burst to get to the next payday or to make a vital purchase you could get an instant loan in the meantime as your credit score grows. Payday loan online companies typically have a quicker application process and are more lenient when it comes to credit checks.

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Warning: Late repayment of payday loans can cause you serious money problems. For help, go to moneyhelper.org.uk.

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